How to avoid TDS: Understanding forms 15G and 15H for EPF and interest income

When it comes to managing your finances, understanding tax implications is crucial. One way to minimise tax deductions, specifically TDS (tax deducted at source), is by utilising forms 15G and 15H. These forms serve as self-declarations to ensure that TDS is not deducted under certain conditions. Let’s delve into the details of these forms, who needs them, and why they are important.

What Are Forms 15G and 15H?

Forms 15G and 15H are self-declaration forms used to prevent TDS on income that is below the taxable limit. Form 15G is intended for individuals other than senior citizens, while Form 15H is specifically for senior citizens. These forms are particularly useful for those withdrawing from their Employees Provident Fund (EPF) or earning interest income from bank deposits.

Why You Need to Fill Out These Forms

If you are an EPF subscriber and wish to avoid TDS at the time of withdrawal, you need to submit Form 15G. Without this form, the Employees’ Provident Fund Organisation (EPFO) will deduct TDS at a rate of 10% on the withdrawal amount. This is applicable when the withdrawal exceeds ₹50,000 and the subscriber has less than five years of service. In the case of senior citizens, Form 15H serves the same purpose.

How TDS Works on EPF and Interest Income

TDS is typically deducted by the bank or the EPFO. For instance, banks deduct TDS on interest income when it is credited to the account holder’s account. Similarly, the EPFO deducts TDS when transferring the withdrawal amount to the subscriber's account. To avoid this, submitting Form 15G or 15H is essential.

Filling Out Form 15G

Form 15G requires you to provide specific details to ensure TDS is not deducted. Here’s what you need to include:

• Name of the Subscriber
• Permanent Account Number (PAN)
• Income Tax Status (Individual or HUF)
• Residential Status
• Address
• Email ID
• Phone Number

These details help the authorities ascertain your eligibility for TDS exemption. It's important to note that failure to submit this form will result in a 10% TDS deduction on your withdrawal or interest income.

Special Cases and Exemptions

There are certain scenarios where TDS is not deducted, even without submitting forms 15G or 15H. These exceptions include:

i) Termination of Service Due to Ill Health: If an employee's service is terminated due to health issues, TDS is not deducted.

ii) Company Shutdown: If the company shuts down, leading to withdrawal of EPF, TDS is not applicable.

iii) Other Uncontrollable Reasons: Any other reasons beyond the employee's control that lead to service termination can also exempt the employee from TDS.

The Importance of PAN

While submitting Form 15G, having a PAN is crucial. If you withdraw EPF without providing a PAN, the tax implication is much higher, with a TDS rate of 30%. Therefore, ensuring your PAN details are up-to-date and included in the form is essential.

Senior Citizens and Form 15H

For senior citizens, Form 15H serves the same purpose as Form 15G. It prevents TDS on income such as interest from fixed deposits (FDs) and EPF withdrawals. Senior citizens can use this form to avoid TDS if their interest income is below ₹50,000.

Summary of Key Points

To avoid TDS on EPF withdrawals and interest income, it is essential to understand and utilise Forms 15G and 15H effectively. Here’s a quick summary:

1) Submit Form 15G to Avoid TDS on EPF Withdrawals: Especially if the amount exceeds ₹50,000 and the service period is less than five years.

2) Form 15H for Senior Citizens: Ensures no TDS on interest income below ₹50,000.

3) Prevent 10% TDS Deduction: By submitting the necessary forms.

4) Higher TDS Without PAN: A 30% TDS rate applies if PAN is not provided.

5) Special Exemptions: No TDS in cases of ill health, company shutdowns, and other uncontrollable factors.

In conclusion, understanding and correctly utilising Forms 15G and 15H can save you from unnecessary TDS deductions, ensuring you retain more of your hard-earned money. Always ensure that your forms are accurately filled and submitted on time to benefit from these tax provisions.