Getting income tax refund is very hectic as it takes a long of time and becomes very frustrating. The department is also not willing to do it fast to process refund. So it’s always advisable to plan your taxes at beginning of the financial year as needn’t to pay extra taxes and wait for the refund.
Two steps can save you from this headache
1- Submitting investment declaration form to employer.
2- Filling form 15G and 15H
But not anybody can fill form 15G and 15H. There are some rules which must follow to fill form 15G and 15H.
According to the tax rules, if your interest income exceeds Rs 10,000 in a year, the bank should deduct a 10% tax at source, or TDS. If you do not furnish your PAN details, the TDS rate will be higher at 20%. However, you can submit a declaration Form 15G and 15H to avoid TDS on interest income. While Form 15G is for individuals below 60 years, HUFs and trusts, Form 15H is for individuals above 60 years of age.
Also, the above declaration can be submitted only by a person who is an Indian resident. So, NRIs cannot avail TDS exemptions. The rules, however, are not so simple and you need to know the intricacies of the law as the repercussion 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 which may range from three months to two years along with fine. The term can be extended up to seven years and with fine, where tax sought to be evaded exceeds '25 lakh,'
Download Forms 15G and 15H with autofill facility in excel FY 2014-15 and 2015-16
Here are the points to check before you file for an exemption on TDS to avoid penalty.
Eligibility Criteria: The basic two conditions for filing 15G are -one, the final tax on his estimated total income computed as per the provisions of the Income Tax Act should be nil; and two, the aggregate of the interest (excluding interest earned on securities) received during the financial year should not exceed the basic exemption slab which is Rs 2.5 lakh. If these criteria are met, you may submit Form 15G and the entire interest income would be credited without any tax cut.
An important thing to note here is that you need to meet both the criteria. Meaning, even if the interest income is less than the basic exemption allowed during that financial year, if your if your total tax liability is not nil, you will not be eligible for Form 15G. The reverse is also true.
Say, your income is Rs 4 lakh, of which Rs 3 lakh is earned as interest from bank. You might invest Rs 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 higher than the basic exemption. In such a situation, you have no choice but to take the refund route.
Form 15H can be only filed by individuals above 60 years of age or someone who or completes 60 years during the financial year. This form imposes only the first condition, that is, 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 Rs 3 lakh for you to be eligible for 15H.For super senior citizens above 80 years, this limit is Rs 5 lakh.
Reverse Gear: If you are eligible, remember, the forms should be submitted at the beginning of the year so as to avoid a situation where the bank has already deducted the tax. Also, fresh forms are required to be filed each year as your income may differ from year to year. But what if your income estimate changes in the middle of the financial year after you submit the forms?
Say, at the beginning of the year your only income was `2 lakh interest earned from fixed deposits. Therefore, you submitted the form. During the financial year your income increased and now your estimated income is `5 lakh post deductions. Here, you will have to submit a simple 15 G withdrawal application to the bank mentioning the correct particulars and reason of change in the same.
"The bank should not have any issue in accepting a change in TDS deductions. In case the bank has some issue in accepting the withdrawal then you should deposit your additional tax liability by way of advance tax to ensure your tax compliance thus avoiding penalty," says Kaushik. Also, they have to be sub mitted at every bank branch where you have a deposit and had filed 15G.