Importance of Form 15G for FD investors

 

The interest you earn through a fixed deposit is entirely taxable according to the income tax bracket you fall under. However, each time your FD accrues interest, your issuer pays a portion of this to the Government, either 10% or 20% as Tax Deducted at Source (TDS). That said, it can so happen that your overall tax liability for the year is nil. In such cases, it’s paramount that you inform your issuer of this so that it doesn’t deduct tax at source. The way to do this is to submit Form 15G. Read on to know more about this important form for FD investors.

How Form 15G helps you save tax on your FD

Consider that you earn Rs.2,40,000 per annum, invest Rs.60,000 in a Bajaj Finance Fixed Deposit for 3 years and opt for an interest payout at maturity only. You earn interest at 8.60%, compounded annually. At the end of the first year, the interest accrued amounts to Rs.5,160.

As the interest you earn exceeds the Rs.5,000 TDS exemption limit, Bajaj Finserv will deduct tax at source. However, because your gross income, Rs.2,45,160 (Rs.2,40,000 + Rs.5,160), is less than Rs.2,50,000, your tax liability is nil. To avoid TDS, submit Form 15G to Bajaj Finserv. As per the Union Budget 2019, you get a complete rebate if your taxable income up to Rs.5 lakh. So, account for this as you plan your FD investment.

Form 15H is the senior citizen’s equivalent of Form 15G

Senior citizens need to submit Form 15H to avoid TDS. Senior investors stand to gain significantly from a Bajaj Finance FD for Senior Citizens as it offers some of the highest interest rates on an FD in India in 2019 of up to 8.95%. What’s more, Bajaj Finserv couples high returns with investment safety as it carries ICRA’s MAAA and CRISIL’s FAAA rating. Being the highest credit ratings in their respective categories, you can be sure of timely payments.

To understand further, take a look at the yield you can enjoy as a senior citizen when you invest Rs.50,000, Rs.1 lakh or Rs.2 lakh for a period of 5 years.

Principal

(in Rs.)

Tenor

(in yrs.)

Interest rate (in %) Returns
(in Rs.)
Returns

(in %)

50,000 5 8.95 76,755 53.51
1,00,000 5 8.95 1,53,510 53.51
2,00,000 5 8.95 3,07,020 53.51

Conditions you must meet in order to benefit from Form 15G

To benefit from Form 15G you must:

  • Be an Indian residing within the country
  • Be less than 60 years of age
  • Possess a PAN card
  • Have a total tax liability of 0

Other situations where you require Form 15G

Here are a few instances wherein you are required to submit Form 15G.

  • EPF withdrawal
  • Post office time deposits
  • Insurance commission
  • Rental income

What to do in case you forget to submit Form 15G to your issuer

In case you don’t submit this form, file your income tax returns and claim a TDS refund. Also, since issuers calculate TDS periodically, on a quarterly basis, submit Form 15G immediately to prevent tax from being cut at source for the remainder of the financial year.

Now that you know how to save on tax with Form 15G, make a smart FD investment right away. Use an FD calculator to forecast your FD yield and once you are ready to begin, book an appointment with a Bajaj Finance representative and start investing in no time at all.

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