Monday, 6 June 2011

How to avoid Tax Deducted at Soruce (TDS) from Interest

All financial institutions and banks are liable to deduct tax (TDS – Tax Deducted at Source) from interest due or paid to any customer, if the total interest paid from the particular branch to a particular customer is more than Rs. 10000 in a financial year. The present rate of TDS on interest is 10%. This is under Section 194A of Income Tax Act 1961.

But if your total income of a financial year is not exceed the minimum taxable limit you should not pay tax. Normally, Senior citizen, retired person and students whose main income is interest, may come under this category. Their total income may not exceed the maximum no income tax limit of Rs. 500000 (for Very Senior Citizen – 80 years and above), Rs. 250000 (for Senior Citizen – 60 years to 79 years) 190000 (for Female) and Rs. 180000 (for Male) in a financial year. In such a situation you should submit income tax return which shows the interest and the amount of TDS deducted from your interest income (You can get this information from the TDS certificate issued by the bank) and other income if any and can get refund of the TDS deducted from you. This will take some time to get back the amount.

If any individual comes under the nil tax category as stated above and have an interest income more than Rs. 10000 in a particular bank can submit Form 15H or Form 15 G and can avoid Income Tax Deducted at soruce (TDS) from interest. This form is available all banks. Form No. 15H is for senior citizen and Form No. 15 G for all. This is a simple format and can download from the income tax website also. Download the Form. You should show the details of your investments and expected interest from those investment. The validity of this form is one financial year and you should fill it again for the next financial year and you should give such form in every bank or branches where you have deposits which get interest.

While submitting from 15H or Form 15G you must declare that the information on income and tax liability provided in form 15H/G is true and complete through the verification part of the form. You must give this form to the bank only if your income tax from all soruces for the financial year is nil.

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7 comments :

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  4. [...] SALARY ONLY YEARLY TDS RETURN IS REQUIRED AND THE DATE OF ISSUING TDS CERTIFICATE IS 31ST [...]

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  5. [...] years and above and Rs. 500000 for Very Senior Citizens – 80 years and above) you should submit Form 15H or Form 15Hg as the case maybe form not deducting TDS from your interest [...]

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  6. helow sir,
    can i get some useful informations to get ride of tax?

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  7. [...] Income Tax and TDS: The interest on unfixed deposit is treated as same as interest on fixed deposit for tax purpose. See How to avoid TDS from interest [...]

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