Can I withdraw a wrongly submitted form 15H for TDS deductions

Staff Desk

11 May 2023

2,222 6 mins read

In this article, we look at what is a form 15H and what can be done if it has been submitted wrongly.

Tax deducted at source, or TDS is a mechanism for tax collection where the government makes the person making the payment for certain types of incomes responsible to deduct a percentage of the payment as tax and pay it directly to the government by making an online TDS payment. This mechanism not only eases the burden of tax collection on the tax authorities but also improves accountability by making the deductor put the payment on record. Usually, a person might not want to put a transaction on record to avoid taxes. So he may want to take the risk because the incentive of saving taxes may be significant. But for a person making a payment, there is no incentive in hiding the payment. Rather, it is the exact opposite. Under the TDS mechanism, if the person making the payment fails to collect the TDS before making the payment and making the TDS payment online, then that person has to pay the TDS from his or her own pocket. So the person Making the Payment will ensure that the tax is deducted and will make the TDS payment online along with all the details of the transaction on the record. So what is form 15H when it comes to TDS? Let’s take a look.

Now there is another way to look at the TDS mechanism. Since TDS is an income tax and the online TDS payment is paid before the end of the year it is an advance tax. And usually, an advance tax is paid by an income-earning individual who knows that he or she is going to cross or has already crossed the minimum limit of taxable income. But under the TDS mechanism, the person making the payment is working under the presumption of the income tax authorities that the person from whom TDS is being deducted has crossed or will cross the minimum limit of taxable income during the year. So TDS is a presumptive mechanism. And the presumption being made is a very big presumption with a large margin for error. Plus TDS on most of the types of incomes that fall under the TDS mechanism is collected at a standard rate, irrespective of the value of the transaction. But actual income tax is calculated with a differential slab rate system. That is, the percentage of income tax is different for different volumes of income. So the amount deduction made and TDS payment made online is almost never going to match the exact amount of income tax liability.

Fortunately, the remedy is quite simple in case of an error. After the final income tax liability is calculated while preparing the annual income tax return, the total amount of TDS deducted from all the payments received during the year is taken and compared to the actual income tax liability. If the total income tax liability is more than the total online TDS payment against his income, then he only has to pay the difference between the two, that is the excess of the income tax liability over the online TDS payments, as income tax. And if the income tax liability is lesser than the online TDS payment then a refund of the excess of the online TDS payment over the tax liability can be claimed from the authorities.

Now let’s take a look at what purpose forms 15H and 15G serve when it comes to TDS.

Table of Contents

Form 15H and 15G

Now there is a certain class of people whose total taxable income is less than the minimum taxable limit. This means that all and any amount of TDS deducted from them is fully refundable as they are exempt from income tax. And if a person’s income is lesser than the minimum taxable limit, then the presumptive nature of TDS can be a heavy burden on them because all the money deducted from their income paid as online TDS payment will be refunded to them only at the end of the year causing liquidity problems with much-needed cash. So there are options for different types of incomes where a person can make a declaration that he or she is below the taxable limit of income and hence they should be exempt from TDS deductions.

Use Vakilsearch`s Income tax calculator to determine your taxable income and report your Individual Tax Return (ITR) with ease.

Form 15G and 15H are two such declarations specifically for interest income received on bank deposits. As per section 194A of the income tax act, TDS is deducted at a rate of 10% on the interest income from deposits, where the annual interest exceeds ₹5,000 for residents and if the annual interest exceeds ₹50,000 in the case of a resident senior citizen. Resident for the purpose of taxation is any person, Indian or foreign citizen, who has been in India for more than a total of 180 days in the financial year.

Now deposits are usually not the only source of income for most people and TDS on interest may not affect everyone very significantly even if their income is below the taxable limit. But many senior citizens solely rely on the income received from the interest on the FD for their livelihood. Hence, Form 15H and 15G allow a person to declare that their income is below the taxable limit and make an application to the bank to not deduct TDS from their interest income.

Wrong submission of 15H and 15G

Now it is possible that you may have submitted form 15H or 15G but it may not always be applicable. For example, your interest income may be below the taxable limit and you may have submitted form 15H to waive the TDS deduction on interest income. But you receive income under some other head unexpectedly. For example, an unemployed person may have applied for a TDS waiver with form 15H or 15G but suddenly gets a job during the year and falls under the taxable bracket. It is also possible that you may make a large unexpected deposit in the FD account during the year increasing your interest income and pushing it into the taxable bracket. For instance, a retired person sells some land and puts the proceeds from the sale into the FD, thereby increasing his interest income significantly. Now the bank has not deducted the TDS during the year. So when at the end of the year you file your income tax return at the end of the year, the income tax authorities will notice that you have been earning interest income on deposits, but on verifying the account statements, they will notice that TDS: https://incometaxindia.gov.in/Pages/Deposit_TDS_TCS.aspx has not been deducted. So the authorities will pull up the bank for an explanation which in turn will produce the declaration made by you under form 15H or 15G. This can be construed as evasion of tax under section 277 of the income tax act, attracting a heavy penalty. So what can be done?

The answer is simple. We just have to remember that TDS is nothing but a tax collection mechanism and not a tax itself. So if someone has not deducted TDS as they should have, then the simple thing to do is declare that income in your income tax return as taxable income and pay the full Tax liability calculated at the rate as per the slab under which the income falls.

Conclusion

There are many such small rules and regulations which may get missed or misunderstood by the layman. Unfortunately, the law is uniform for everyone and it cannot give any single person the benefit of doubt even though the intention was not to evade. So it is always important to have every financial transaction vetted by a tax expert so he can analyse the transaction from a tax perspective and not just inform you about the rules and regulations applicable, but help you structure your transaction in a manner that keeps your tax liability to a minimum. To consult with a tax consultant, get in touch with Vakilsearch today and we will connect you to the right person who can guide you with your tax related queries and concerns.

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