In a major relief to senior citizens who pay tax deducted at source (TDS) and later seek refunds, the Central Board of Direct Taxes (CBDT) has notified that those aged 60 years and above with a taxable income of up to Rs 5 lakh can now submit Form 15H in banks and post offices to claim exemption from TDS on interest income from deposits.

This amendment was done after the Interim Budget presented on February 1, 2019 gave tax rebate to individuals having a taxable annual income of up to Rs 5 lakh in a financial year. “Section 87A of the Income-Tax Act, 1961 has been amended vide Finance Act, 2018 which provided that a resident individual, having total income up to Rs 5 lakh, shall be entitled to a rebate of an amount being the amount of tax chargeable or Rs 12,500, whichever is less,” the CBDT press release says.

At present, Note 10 of Form 15H does not take into account the maximum rebate of Rs 12,500 under Section 87A, which is available to the assessee in respect of the tax calculated on income. So, there could be cases, where, though income of the assessee would be above the minimum amount chargeable to income tax, the tax liability may be nil after taking into account the 87A rebate.

Amendment in Form 15H
The amendment by the CBDT states that banks and financial institutions would accept Form 15H from assessees whose tax liability is ‘nil’ after considering rebate available under Section 87A. Till last financial year, the limit for seeking TDS exemption was Rs 2.5 lakh.

Senior citizens have to submit Form 15H to banks at the beginning of a financial year to ensure that no tax is deducted at source on interest income. “Sub-section (1C) of Section 197 A of the Income-tax Act, 1961 read with rule 29C of the Rules, inter alia, provides that no deduction of tax shall be made in case of a resident individual, who is of the age of 60 years or more, if he furnished a declaration in Form 15H to the person responsible for paying income of the nature referred to in Section 192A, 193, 194, 194A, 194D, 194DA, 194EE, 194-I or 194K, to the effect that the tax on his estimated total income will be nil,” the CBDT note says.

The Interim Budget amended Section 194-A. Earlier, under Section 194-A, if the interest income from fixed deposits in banks/post office exceeded Rs 10,000 in a year, the amount was credited to the individual only after deducting tax at the rate of 10%. Interest earned from fixed deposits is taxed on accrual basis at the slab rate applicable. At present, on fixed deposits, banks deduct 10% TDS on interest to residents, 20% for those who do not have PAN and 30.90% to non resident Indians. Even recurring deposits attract tax deduction of 10% of the interest earned.

Submitting 15H/G
Exemption on TDS can be claimed by submitting Form 15G (those below 60 years) and Form 15H (60 years and above). Investors seeking non-deduction of TDS on interest income from bank or post office fixed deposits, recurring deposits will have to file Forms 15G or 15H under the provisions of Section 197 A of the Income Tax Act, 1961. This must be done at the beginning of the financial year and these forms are valid for one financial year. These forms should be filed if the individual’s total income from all sources is below the taxable limit.

In the Form 15G/H, an individual has to mention name, PAN number, residence address, estimated income and total number of such forms submitted along with the aggregate amount of income for which the declaration is filed. Investors will have to give details of various investments, the code of the income-tax assessment office, email, phone number, occupation, etc. The individual will be liable for prosecution for any false statement under Section 277.