Imprisonment and fines await
those who wrongly file the two forms to avoid tax on interest income.
Getting a tax refund can be cumbersome as delays by the Income Tax
Department are common. It makes sense to plan your taxes at the beginning of
the year, to avoid overpayment and the refund process. Submitting investment
declaration with your employer on time and filling form 15G, 15H will save you
half the hassles. However, you cannot randomly submit forms 15G and 15H.
If your interest income exceeds Rs. 10,000 a year, the bank will
deduct 10% tax at source. If you do not furnish PAN details, the TDS rate will
be higher at 20%. However, you can submit a Form 15G and 15H to avoid TDS on
interest income. While Form 15G is for Indian residents below 60 years of age,
HUFs and trusts, Form 15H is for those above 60.
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 ranging from three months to two years,
and a fine. The term can be extended to seven years and fine, where tax sought
to be evaded exceeds Rs. 25 lakh,” says Sudhir Kaushik, CA and CFO, Taxspanner.
Keep in mind the following points.
The basic conditions for filing 15G are–the final tax on estimated
total income computed as per the Income Tax Act should be nil; and, the aggregate
of the interest (excluding interest earned on securities) received during the
financial year should not exceed the basic exemption slab of Rs. 2.5 lakh. If
these criteria are met, you can submit Form 15G and the entire interest income
would be credited without any tax cut.
You need to meet both criteria. Even if the interest income is
less than the basic exemption allowed during that financial year, but your
total tax liability is not nil, you will not be eligible for filing Form 15G.
The reverse is also true. Say your income is Rs. 4 lakh, of which Rs. 3 lakh is
earned as interest from the 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 high er than the basic exemption of Rs.
2 lakh. The refund route is your only recourse.
Form 15H can be only filed by individuals above 60. This form
imposes only the first condition–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.