Monday, 27 January 2020
Tax Planning

ITR filing: What are Forms 15G and 15H? Why should you fill it?

What is Form 15 G? Why 15G form is required for FD?

Around 5.52 Crore citizens and 8.41 Lakh companies filed for income tax returns in the financial year 2017-18. Form 15G and 15H have to be submitted to avail tax exemption benefits on total investment.  Any tax deduction on interest income can be restricted up to a stipulated limit through such forms.

Form 15G has to be submitted by all citizens of India below the age of 60 years looking for tax waivers. 15H, on the other hand, caters to senior citizens residing in this country. Tax benefits of up to Rs. 1.5 Lakh are extended, as per the Income Tax Act of 1961.

 Tax savings options against form 15G or 15H available

  • Employees Provident Fund

Withdrawing more than Rs. 40,000 from an EPF account before completion of 5 years is subject to TDS deductions. However, exemptions can be availed if the total income of employees is below Rs. 2.5 lakh per annum. In case of senior citizens, the non-taxable income slab is extended to Rs. 3 Lakh. Form 15G and 15H have to be submitted to the financial institution to ensure no tax is deducted at source.

  • Fixed Deposits

Interest income on fixed deposits having a tenor of more than 5 years is subject to tax exemptions. Such waivers are only available till up to a sum of Rs. 1.5 Lakh per annum. Note that this threshold applies to any interest as income or investment, the latter even includes interest paid home loans. One of the significant benefits of form 15G or 15H for fixed deposits is that it can be submitted to prove that an individual does not lie in the tax-paying income bracket.

If total income exceeds the stipulated limit, then any amount over Rs. 1.5 Lakh is eligible for taxation. This clause about TDS on FD interests should be known beforehand while determining income tax returns for a financial year.

5-year fixed deposits are one of the best tax saving options available in the country, as it comes with high yields at relatively no risk. Major financial institutions such as Bajaj Finance offer interest rates of up to 8.70%, making it one of the highest return generating investment schemes available in the market.

  • Corporate Bonds

Dividend income on debt instruments such as corporate bonds is subject to TDS deductions as well. Any income higher than Rs. 5,000 through this market security is taxable. However, tax saving options apply if the total income an individual does not fall under the taxable income category, i.e. an annual income lower than Rs. 2.5 Lakh.

However, upon comparing fixed deposits vs equities and debt securities to analyse, which is better, it can be established that the former is a non-risk high return bearing instrument. On the other hand, market-linked securities such as equity or debt tools might generate relatively higher returns but have high undue risks in the market.

Filing Form 15G and 15H are crucial to avail any tax exemption benefits from significant investment tools in the market.

  • Post office deposits

Waivers on such deposits maintained with banks are only eligible if the total returns generated annually do not exceed Rs. 1.5 Lakh. In case of senior citizens, total income exempted from any direct tax calculations is up to Rs. 2 Lakh respectively. Post office deposits are one of the best schemes for saving your money, as they are entirely hinged on the market and are backed by the government.

Submission of such documents can be done in the following method

  1. Fill the requisite forms by using KYC documents, communication address, PAN details, as well as previous tax assessment records.
  2. Estimation of gross income before TDS deductions has to be entered. Details regarding the nature of the same have to be filled up simultaneously.
  3. Total income of the previous year has to be documented as well.

Filing for income tax returns after submission of form 15G and 15H is crucial in many aspects. Such documents act as a proof of income, as well as protect an individual from numerous penalty charges levied in situations of non-filing. Also, income tax return receipt, along with Form 15G or 15H, help in hastening the loan approval process of most non-banking financial institutions.

Image Courtesy: cleartax

Mr. Dinesh loves his career and thus has gained a strong foothold in the field of digital marketing. He is compassionate and therefore strongly promotes the ideology of meditation. He is a meditation mentor and voluntarily promotes meditation. He is a passionate reader of science and spirituality and this is the reason he has the most practical fundamentals of leading life.

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