Don’t Misuse Forms 15G, 15H to Avoid TDS

(As Published in Times of India on April 27, 2015)
Imprisonment and fines await those who wrongly file the two forms to avoid tax on interest income.
Getting a tax refund can be cumbersome as delays by the Income Tax Department are common. It makes sense to plan your taxes at the beginning of the year, to avoid overpayment and the refund process. Submitting investment declaration with your employer on time and filling form 15G and 15H will save you half the hassles. However, you cannot randomly submit forms 15G and 15H.
If your interest income exceeds 10,000 a year, the bank will deduct 10% tax at source. If you do not furnish PAN details, the TDS rate will be higher at 20%. However, you can submit a Form 15G and 15H to avoid TDS on interest income. While Form 15G is for Indian residents below 60 years of age, HUFs and trusts, Form 15H is for those above 60.
The repercussions of wrong filing is stiff. A false or wrong declaration in Form 15G attracts penalty under Section 277 of the Income Tax Act. “Prosecution includes imprisonment ranging from three months to two years, and a fine. The term can be extended to seven years and fine, where tax sought to be evaded exceeds 25 lakh,” says Sudhir Kaushik, CA and CFO, Taxspanner.Keep in mind the following points.
The basic conditions for filing 15G are–the final tax on estimated total income computed as per the Income Tax Act should be nil; and, the aggregate of the interest (excluding interest earned on securities) received during the financial year should not exceed the basic exemption slab of 2.5 lakh. If these criteria are met, you can submit Form 15G and the entire interest income would be credited without any tax cut.
You need to meet both criteria. Even if the interest income is less than the basic exemption allowed during that financial year, but your total tax liability is not nil, you will not be eligible for filing Form 15G. The reverse is also true. Say your income is 4 lakh, of which 3 lakh is earned as interest from the bank. You might invest 1.5 lakh in PPF and be out of the tax net, but you are not eligible for Form 15G as though your tax liability is zero, the interest income is high er than the basic exemption of 2 lakh. The refund route is your only recourse.
Form 15H can be only filed by individuals above 60. This form imposes only the first condition–the final tax on the investor’s estimated total income should be nil. So, if you are above 60, your taxable income for the financial year can be up to 3 lakh for you to be eligible for 15H. For super senior citizens above 80 years, this limit is 5 lakh.