APPLY PAN CARD FOR FREE FROM YOUR HOME - INCOME TAX DEPARTMENT

Friday, 27 March 2015

Form 15G and Form 15H to save TDS on Interest Income

Following up from our post about what to do when bank deducts excess TDS on interest income – let’s discuss today what to do when your Total Income is below the taxable limit and you don’t need to pay any tax, should the Bank still deduct TDS from your Interest Income?

Since TDS is basically tax which is collected on your income by the one who pays you – no TDS should be deducted if your total income is not taxable. Though Banks are required to deduct TDS if your Interest Income is more than Rs 10,000 in a year, but if your total income is below the taxable limit you can submit Form 15G and Form 15H to the Bank requesting them to not deduct any TDS on your interest.

Do note that these forms are valid for one financial year, therefore do check whether you satisfy the conditions for filling them each year and submit them at the start of each financial year.  Submitting them as soon as the financial year starts will ensure the banks don’t deduct any TDS on your interest income. Even though your FDs may be maturing in a few years, banks deduct TDS on a yearly basis, do submit these forms in time.

Here are the conditions you need to fulfill to this Form 15G –

• You are an Individual or HUF
• You should be less than 60 years old
• Tax calculated on your Total Income is Nil
• The total interest income for the year is less than the minimum exemption limit of that year, which is Rs 2,50,000 for financial year 2014-15.

If you are a senior citizen, you can submit Form 15H. Here are the conditions you need to fulfill to submit Form 15H –

• You are an individual
• You must be a Resident Indian, this form is not for NRIs even though they may satisfy other conditions
• You are 60 years old or will be 60 years old during the year for which you are submitting the form
• Tax calculated on your Total Income is Nil

Tuesday, 24 March 2015

PPF vs. Sukanya Samridhi Scheme

Which investment scheme should you pick for your girl child?

PPF has always been the go-to investment option under Section 80C when taxpayers wish to save taxes. Investment made is PPF can be claimed as a deduction under Section 80C, which reduces your taxable income.

The maximum deduction allowed is Rs.1,50,000.

To max out the full limit, it’s also quite common to open PPF accounts on your children’s name. But with the newly-introduced scheme Sukanya Samridhi, it would be wise to choose Sukanya Samridhi Scheme over PPF for your daughter.

Sukanaya Samridhi has been made completely tax-free this Budget, just like PPF. This means that investment is allowed as a deduction, interest earned is exempt from tax and you are not taxed at the time of withdrawal.

So which investment should you prefer for your daughter? Let’s compare the two.

	Public Provident Fund	Sukanya Samridhi Scheme
How to open the account?	No such limitations apply.	An account can be opened for a girl child up to 10 years of age from the date of birth.
Duration money is locked in	15 years (Partial withdrawal allowed after the 7th year)	Investment locked in till the girl turns 21 (Partial withdrawal allowed when she is 18 years old)
Rate of return	8.7% for FY 2014-15 (Interest rate revised periodically)	9.1% for FY 2014-15 (Interest rate revised periodically)
Minimum investment required every year	Rs.500	Rs.1,000

With the same benefits as a PPF account and higher returns, Sukanya Samridhi scores over PPF for your girl child.

Sukanya Samridhi Accounts can be opened from post offices across India.

Monday, 23 March 2015

Now TDS will be deducted on Recurring Deposits

In the Budget for 2015 some changes have been announced regarding interest earned on Recurring Deposits.

What are Recurring Deposits? Recurring Deposits are a special kind of Fixed Deposits. Almost like making FDs in installments instead of a lump sum. You can open a RD account and make periodical transfers to your RD account from your monthly income. This helps you set aside some money regularly to the RD account and earn an interest higher than a savings account.

Changes in Budget 2015 for RDs

• TDS shall be deducted on interest income from RDs
• TDS shall be deducted when interest income from all the branches of the Bank exceeds Rs 10,000 in a financial year. (Earlier, TDS was deducted when interest income exceeded Rs 10,000 in a financial year from one branch)
• 

When is the change effective? This change is effective 1st June 2015.

What really changes? Interest earned on RDs has always been fully taxable. Just like FD interest income and savings account interest income it gets added to your Income from Other Sources. Earlier there was no TDS on RD interest and now TDS shall be deducted at 10%. If you fail to provide PAN information TDS shall be deducted @ 20%.

So effectively nothing changes if you have already been offering your RD interest income for tax. Since RD interest gets added to your total income it is taxable at the slab rate applicable to you. If your total income is below the taxable limit you should submit form 15G and form 15H to the Bank and request that no TDS should be deducted. (Do note that deduction of Rs 10,000 undersection 80TTA is available on interest on savings account and NOT on interest income from FDs and RDs)

What is the purpose of TDS then if nothing changes? When Tax is deducted at source it helps the IT department bring more and more people under the tax net. So the IT Department takes TDS deduction & defaults very seriously. Earlier some could get away with having FDs and RDs in separate branches and escape TDS if it does not aggregate to Rs 10,000. But from now on – the interest on deposits from all the branches of a bank shall be summed up to check for TDS deduction eligibility.

If you have not been adding RD interest income to your total income for whatever reason – there is no escaping this now!