How senior citizens can avoid 10% TDS on fixed deposits?
Premium- This year onwards, senior citizens aged 75 years and above looking to get exemption from filing income tax should fill and submit form 12BBA with their respective banks
The start of a new financial year is a good time to submit various self-declaration forms, such as Form 15G or Form 15H, to entities asking them not to deduct tax on interest income when the taxable income is below the basic exemption limit. This year onwards, senior citizens aged 75 years and above looking to get exemption from filing income tax should fill and submit form 12BBA with their respective banks.
Senior citizens with income only from pension and interest from fixed deposits are eligible for this exemption. The additional condition is that the pension and interest income should be deposited in the same bank.
Form 12BBA is an exhaustive form that will seek details on tax deductions to be claimed under section 80C to section 80U, tax rebate claimed under section 87A that brings down taxable income below ₹5 lakh exemption and details of total income from pension and fixed deposit (FD) interest.
As per the Central Board of Direct Taxes (CBDT), after the form is submitted, the bank will compute the total income of the taxpayer after considering the tax deductions and rebate under section 87A and deduct tax on the derived income on the basis of slab rates. Moreover, to ensure that senior citizens don’t have difficulty filling the form, CBDT has instructed banks to assist eligible seniors in duly filling the form.
Essentially, the bank will file the Income-Tax Return (ITR) on the senior citizen taxpayer’s behalf. “This is a good step towards compliance for senior citizen taxpayers who most often find filing ITR arduous," said Karan Batra, founder, charteredclub.com.
Additionally, submitting Form 12BBA will also save senior citizen taxpayers the hassle of getting refund on tax deducted at source (TDS) on FD interest, said Batra. As per I-T laws, 10% TDS is deducted on interest income above ₹50,000 earned by a senior citizen aged 60 years and above. For taxpayers in 5% and 10% tax slabs, the 10% TDS will result in higher tax outgo than what the taxpayer will pay as per his tax slab. For instance, someone with ₹7 lakh interest income will pay ₹70,000 tax when 10% TDS is deducted, whereas if the same taxpayer submits Form 12BBA, he will have to pay ₹52,500 tax. In the former case, the taxpayer will have to get refund of ₹17,500.