How to Make Sure That No Extra TDS is Withheld from Income
Many taxpayers commonly encounter Tax Deducted at Source (TDS) when they invest in different financial instruments. This is particularly relevant in cases involving interest and dividends, as TDS is applicable once the income surpasses a certain threshold. This situation can be worrisome for individuals with no taxable income, as they must later seek refunds from the tax department. Fortunately, there is a solution to prevent TDS by submitting either Form 15G or 15H.
Step-by-Step Guide to Navigate No Additional TDS is Deducted on Income
Below are the steps you can check so that no more taxes will be deducted from your income:
Non-Taxable Earnings
There are numerous individuals who may not have taxable earnings in a given year. This group includes senior citizens, who may not have substantial income but may have investments. It also encompasses housewives who lack a regular income but have saved and invested money. Some people may temporarily fall into this category, such as those taking a short work break.
The issue for these individuals is that if they encounter Tax Deducted at Source (TDS), they won't receive the withheld money until the end of the financial year after filing their return, which can be a lengthy process. Therefore, it is essential to prevent TDS altogether to avoid this inconvenience.
Limits of TDS Threshold
There exists a specific threshold beyond which income from a specific source becomes subject to TDS (Tax Deducted at Source). These thresholds vary depending on the type of income and can also differ based on the taxpayer's category.
For instance, the threshold for dividend income is Rs 5,000, and TDS applies once this limit is surpassed. In the case of bank interest, the threshold stands at Rs 40,000 for regular individuals but increases to Rs 50,000 for senior citizens. These threshold limits hold significance because TDS becomes applicable to all when these limits are exceeded.
TDS Forms 15G and 15H
The initial point to grasp is which Form is applicable to specific groups of individuals. TDS Forms 15G and 15H are the forms utilized to ensure the avoidance of TDS. These forms are designed to prevent TDS for individuals who do not have taxable income.
Form 15G is intended for individuals under the age of 60, while Form 15H is designated for senior citizens, meaning those aged 60 or above.
It's crucial to note that the form must be submitted to the entity responsible for tax deduction. The key criterion is that the individual's annual income must be below the basic exemption threshold, and the tax liability on this income should be zero. If even a small amount of tax is owed on the income, these forms cannot be submitted.
Attributes
Several crucial details should be considered when submitting this form. It's important to note that this form needs to be submitted annually, so if one was submitted in the previous fiscal year, it will not be valid for the current one. Consequently, a new form must be submitted for the current financial year.
Furthermore, when dealing with fixed deposits, the form must be submitted to the branch where the deposit is held. For dividend-related matters, it should be provided to the registrar. In most cases, the registrar will communicate through email with shareholders before distributing dividends, explaining how to submit the form.
In certain locations, there may be an option to submit the form online; otherwise, it must be physically delivered. The form must include the Permanent Account Number (PAN) and it should also contain details about income and investments. Accurate completion of the form is a crucial step in the overall process.