Fixed Deposit (FDs) are one of the most popular and secure investment options in India. They provide a guaranteed return on investment and are an excellent way to preserve capital while earning interest. However, the interest earned on FDs is taxable, and if it exceeds a certain threshold, banks deduct Tax Deducted at Source (TDS). For investors looking to maximise their tax benefits, Form 15G is a smart tool that helps reduce or avoid TDS on their fixed deposit certificate.

In this article, we’ll explore how Form 15G works, who can use it, and why it is beneficial for fixed deposit investors seeking to optimise their tax savings.

What is Form 15G?

Form 15G is a self-declaration form that investors can submit to their bank or financial institution to ensure that no TDS is deducted from the interest earned on their investments. This form is primarily used by individuals whose total income falls below the taxable limit. By submitting Form 15G, eligible individuals can avoid TDS deductions, ensuring that their interest income is not unnecessarily reduced.

Key conditions to submit Form 15G:

1. The individual’s total income should be below the taxable threshold (as per current tax regulations, this is Rs. 2.5 lakhs per annum for individuals below 60 years).
2. The total interest income on fixed deposits must not exceed the basic exemption limit.

Importance of Form 15G for fixed deposit investors

For fixed deposit investors, avoiding TDS deductions is crucial in maximising the returns on their investment. Banks deduct TDS at 10% if the interest earned in a financial year exceeds Rs. 40,000 (Rs. 50,000 for senior citizens).

Example scenario:

Consider a young investor who has deposited Rs. 5 lakhs in a fixed deposit that offers 6% annual interest. The annual interest income would be Rs. 30,000, which is below the TDS threshold. However, if the investor has no other income and falls below the taxable income limit, they can submit Form 15G to prevent the bank from deducting TDS on this interest.

Who can submit Form 15G?

Eligibility criteria:

• Resident individuals below 60 years of age can submit Form 15G.
• Hindu Undivided Families (HUFs) can also submit this form to avoid TDS.
• Individuals with total income below the taxable threshold as per income tax rules.
• Those earning income primarily from interest on fixed deposits and other investments.

Who cannot submit Form 15G:

• Senior citizens (60 years and above) cannot submit Form 15G but can submit Form 15H instead, which is designed for them.
• Individuals whose total income exceeds the basic exemption limit.

How to submit Form 15G

Submitting Form 15G is a simple and straightforward process. Most banks and financial institutions provide online and offline options for submission.

Steps to submit Form 15G:

1. Obtain the form: You can download Form 15G from the Income Tax Department’s official website or collect it from your bank.
2. Fill in the details: Provide your personal details, PAN number, fixed deposit details, and income estimates.
3. Submit to the bank: Submit the completed form to your bank either physically or through their online banking portal (if supported).
4. Keep a copy for your records: Ensure you retain a copy of the submitted form for your records, as it may be needed during tax filing.

Benefits of submitting Form 15G for fixed deposit investors

1. Avoid unnecessary TDS deductions

By submitting Form 15G, you prevent your bank from deducting TDS on your interest income, which ensures that your interest earnings remain intact. This is particularly beneficial for individuals who are not liable to pay income tax.

2. Maximise your interest income

For fixed deposit investors, maximising interest income is key. TDS deductions can reduce the actual returns from your investment. By submitting Form 15G, you ensure that the interest earned on your fixed deposit certificate remains untouched by TDS, allowing you to earn the full interest amount.

3. Eliminate the need for tax refunds

If TDS is deducted, individuals who fall below the taxable income limit must file an income tax return to claim a refund of the deducted amount. This process can take time and effort. By using Form 15G, you can avoid the need for such refunds, simplifying your tax filing process.

4. Streamlined process

Submitting Form 15G is simple, and most banks now offer digital submission options, making it easy for investors to avoid TDS deductions without unnecessary paperwork.

Conclusion

Form 15G is a valuable tool for fixed deposit investors looking to maximise their tax benefits and avoid unnecessary TDS deductions. Always make sure to submit the form early in the financial year and keep accurate records to enjoy the full benefits of your fixed deposit investments.