The Corporate Fixed deposit (CFD) is one of the most preferred investment options that enable investors to earn assured returns on their deposit over a specific period. However, the interest income one gets from the fixed deposit is fully taxable. If the total interest earnings from Corporate FD exceeds Rs. 5000 limit, the provider will deduct the TDS (Tax Deductible At Source) as per the Income Tax Act, 1961.
What are 15G and 15H forms?
The 15G and 15H forms are self-declaration forms that an individual submits to the respective providers requesting not to deduct TDS on interest income as their income is below the basic exemption limit.
The benefits of Form 15G and 15H cannot be claimed by Non-resident Individuals(NRIs), private limited companies, or a firm.
Please note that the form needs to be submitted every 1st week of the financial year as well as while doing a fresh investment.
What will happen if the client has not submitted the 15G/15H forms?
If the client has not submitted the 15G/15H form on time, the respective provider would deduct the TDS based on the tenure selected. In that case, the client can follow either one of the below ways:
The client can submit the 15G / 15H form and prevent the provider from deducting the TDS in the future
The client can file Income Tax Return(ITR) and request a refund from the Income Tax department for excess TDS deduction. The provider cannot provide a refund on excess TDS, as the provider already deposited it to the income tax department.
When TDS will be deducted?
For cumulative, the client will receive the maturity amount after deducting the TDS at the end of the tenure period. Even if the client receives the maturity amount at the end of the tenure, TDS will still be deducted every year as per Income tax regulations. So, the client is requested to submit the 15G/15H form, every 1st week of the financial year until the tenure period is completed to prevent the TDS deduction from the provider's end.
For Non-cumulative, as per the selected tenure, the client will receive the maturity amount after deducting the TDS.
Individual / HUF / Sole proprietor clients: A standard TDS deduction of 10% from the interest will be done by the provider, regardless of the client's tax slab while crediting the interest amount to the client's bank account. As per the income tax slab, the client has to pay the remaining TDS amount while filing the ITR.
The client can also submit a 15G/15H self-declaration form to avoid the TDS deduction from the provider's end, however, if the interest earnings get more than 1 lakh, mandatorily the TDS will be deducted from the respective provider's end.
NRI clients: There won't be any TDS for NRE clients, however, the NRO clients are liable to pay a tax of 30%. If the client is paying tax in a foreign country and wishes to avoid double tax for FD investment, then the client needs to provide the Double Taxation Avoidance Agreement(DTAA) form and Tax Residency Certificate (TRC).
Trust: There will be a standard TDS deduction of 10% from the interest earnings that will be done by the respective provider. The client can also submit a 15G self-declaration form to avoid the TDS deduction from the provider's end however as per the income tax slab, the client has to pay the remaining TDS amount while filing the ITR.
Note: For the Partnership firm, Private limited company, and the unincorporated association there will be a standard TDS deduction of 10% done by the respective provider on interest earnings of more than Rs 5000.
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