PremiumWhere the total income of the individual is below the basic exemption limit, Form 15G can be submitted with the prescribed financial institution (including a bank) requesting that no tax be deducted on the interest income paid to individual on the deposits
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I am employed in a PSU bank and wish to get exemption from deduction of TDS on my recurring deposits (RDs) that are likely to mature in 2027 and 2030. Since my income is more than the TDS exemption limit, I cannot submit Form 15G. However, I intend to pay the tax in advance towards RD interest income. Is there any way I can get a TDS exemption certificate? The purpose of getting an exemption certificate is to protect the maturity value of the RDs.
—Subodh Prasad Karnav
We understand that you are a resident of India and not a senior citizen (now as well as in the financial year of maturity of the recurring deposits).
As per the Income Tax Act, where interest income from time deposits with prescribed financial institutions for a financial year (FY) exceeds the prescribed limit (currently INR ₹40,000), TDS at applicable rate shall be deducted. Where the total income of the individual is below the basic exemption limit, Form 15G can be submitted with the prescribed financial institution (including a bank) requesting that no tax be deducted on the interest income paid to such individual on the deposits.
Further, where the tax rate at which the total income is subject to tax is nil or lower than the rate at which the TDS is being deducted (irrespective of any advance tax paid by the recipient of income), then an application for lower or nil deduction certificate (LDC) may be made with the jurisdictional tax officer in the prescribed form by the recipient of income. Post examining the relevant documents, the tax officer may at his/her discretion issue an LDC stating a lower rate of TDS deduction. In such case, the TDS will be deducted at the rate specified in the LDC.
Separately, interest income from recurring deposits is taxable under the head ‘Income from Other Sources’ (IFOS) according to the method of accounting (i.e., mercantile/cash basis) regularly employed by you. Accordingly, in case historically you have been offering interest income/income from other sources based on accrual/receipt basis, then you could follow the same approach for income from these recurring deposits as well. The interest income will be taxable as per slab rates applicable to you for the respective financial year (FY) in which the same is offered to tax. Any TDS already deducted by the bank on these deposits in the relevant FY will be available as a credit against the income tax payable by you for the respective FY. If taxes deducted at source fall short of the applicable tax rate, you would need to discharge the balance taxes by payment of advance tax as per prescribed instalments.
My father is an ex-serviceman. He receives a monthly pension and works as a security head in a defence welfare company. How should he file an ITR?
—Name withheld on request
The monthly pension received by your father shall be taxable in his hands as salary income. The categorization of income received from the defence welfare company will depend upon the exact terms of the work contract (i.e. whether in the nature of salary income, professional income, etc.). The said income would need to be reported accordingly in the applicable income tax return (ITR) form, which would need to be filed online (or offline version in specified circumstances) on the income tax website.
The ITR form applicable to you would depend upon various factors such as your other sources of income, categorization of income from defence welfare company, number of house properties owned and the nature of assets. Depending upon the ITR form, the details to filled will vary accordingly.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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