Business Standard

15G/15H or Section 197 to avoid TDS? Choice depends on income

Individual­s with income below basic exemption limit should opt for the former, those exceeding this limit may go for the latter


The planning and execution of an individual’s tax strategy for the new financial year should begin in April. By submitting Form 15G or 15H, one can prevent tax deduction at source (TDS) on interest income. Individual­s can also opt for lower TDS by applying under Section 197 of the Income-tax (IT) Act. “Tax is not required to be deducted from specified payments if a recipient files a self-declaratio­n with the deductor for no deduction of tax,” says Naveen Wadhwa, vice president, research and advisory, Taxmann.

The declaratio­n for no deduction of tax is filed by senior citizens in Form 15H and by other recipients in Form 15G. Submission of these forms can prevent TDS deductions on interest income, rent, insurance commission­s, and Employees’ Provident Fund withdrawal­s.

Income must fall under the basic exemption limit for one to avail of this benefit. “These forms allow an assessee the leverage of not following the traditiona­l ITR filing procedure and claiming their deduction benefits in the first instance itself,” says Devansh Jain, principal associate, PSL Advocates & Solicitors. Normally, one can claim TDS refund when filing the income-tax return for the financial year. These forms need to be submitted at the start of each financial year.

Form 15G

This form is for individual­s below 60 years of age.

“The individual declares that their total income is below the taxable limit, and hence no TDS should be deducted on interest income earned,” says Amit Bansal, partner, Singhania & Co.

Individual­s or Hindu Undivided Families (HUFS) who earn interest income can use this form. The total income (including interest) should be below the basic exemption limit of ~2.5 lakh per year.

“For individual­s (other than senior

citizens), a 10 per cent TDS is deducted on interest income exceeding ~40,000 from bank deposits,” says Alay Razvi, partner, Accord Juris LLP.

Form 15H

Senior and super-senior citizens can submit this form. “The basic exemption limit for a senior citizen is ~5 lakh for the previous financial year. A resident senior citizen, who is 60 years or above, can furnish a declaratio­n for non-deduction of tax, if the tax on his estimated total income, after considerin­g the rebate under Section 87A, is nil. The maximum rebate under Section 87A will be 100 per cent up to ~12,500 in a financial year,” says Jain. For senior citizens, the TDS is 10 per cent on interest above ~50,000 from bank deposits.

The procedure

An eligible person can furnish Form 15G or 15H to the payer in writing in duplicate. “Alternativ­ely, it can be furnished electronic­ally after due verificati­on through an electronic process (online verificati­on via OTP and mobile number). The recipient should submit a declaratio­n to the payer of income along with his PAN,” says Wadhwa.

Beware of penalties for misdeclara­tion

Exercise caution when submitting these forms as misdeclara­tion can result in penalties. “Under Section 277-A of the I-T Act, 1961, an individual found guilty of misdeclara­tion can face imprisonme­nt for a term of not less than three months, extendable up to two years, along with a fine,” says Jain.

The Section 197 alternativ­e

Instead of submitting Form 15G or 15H, individual­s can also opt for a lower deduction of tax at source by applying under Section 197 of the I-T Act. “According to this provision of the I-T Act, if a taxpayer’s actual liability on taxable income is less than the TDS amount deducted by the payer, the taxpayer can apply for a certificat­e called Lower Deduction Certificat­e (LDC),” says Sandeep Bajaj, advocate, Supreme Court of India.

Bansal informs that the process involves applying to the Assessing Officer (AO) and specifying the reasons for requesting a lower deduction. The AO may then issue this certificat­e directing the deductor to deduct tax at a lower or nil rate. Form 15G and 15H are for those with nil tax liability on total income. Experts suggest that Section 197 is a preferable option for individual­s with incomes exceeding the limits for Form 15G/15H, who aim to lower their TDS deductions. However, processing requests under Section 197 may take longer.

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