How to Stop TDS on Your Fixed Deposits Using Form 15G and 15H#
The Hidden Cost of Fixed Deposits#
Fixed Deposits (FDs) remain the favorite investment for conservative Indian investors. However, there is a catch.
Under Section 194A of the Income Tax Act, if the interest you earn from your FDs exceeds ₹40,000 in a financial year (₹50,000 for senior citizens), the bank is legally required to deduct a 10% TDS (Tax Deducted at Source) before crediting the interest to your account.
But what if your total annual income (including the FD interest) is less than the basic exemption limit (e.g., ₹3 Lakhs under the new regime)? You technically owe zero income tax, yet the bank still deducts 10%. While you can claim a refund by filing an ITR, your money gets unnecessarily blocked with the government for months.
The Solution: Form 121 and Form 121#
You can legally instruct the bank not to deduct any TDS by submitting a self-declaration form at the beginning of every financial year (April).
1. Form 121 (For Individuals below 60 years)#
You can submit Form 121 if you meet both of these conditions:
- Your total estimated taxable income for the financial year is below the basic exemption limit.
- The total interest income you expect to earn is also less than the basic exemption limit.
2. Form 121 (For Senior Citizens 60 years and above)#
The rules are more relaxed for senior citizens. You can submit Form 121 if:
- Your final estimated tax liability for the financial year is NIL. (Even if your interest income alone is higher than the basic exemption limit, as long as deductions bring your total tax liability to zero, you can submit this form).
Critical Rules to Remember#
- Annual Submission: These forms are valid for only one financial year. You must submit a fresh form every April.
- Submit to all branches: If you have FDs in multiple banks, you must submit the form to each bank separately. (Most banks now allow you to submit this online via net banking).
- False Declarations: Do not submit Form 121/H if your tax liability is not zero. Making a false declaration in these forms is a serious offense under Section 277 of the Income Tax Act, punishable by fine and imprisonment.
Submit your forms early in April to ensure your FD compound interest grows uninterrupted!