In a significant development, senior citizens can now enjoy a tax exemption on Fixed Deposit (FD) interest. The government has introduced a tax concession aimed at benefiting the elderly population. If you’re a senior citizen looking to avoid the 10% Tax Deducted at Source (TDS) on your FD interest, there are important measures you need to take.
Let’s explore the rules and steps you should follow to avail this exemption.
Submitting Self-Declaration Forms:
At the beginning of the financial year, senior citizens should submit self-declaration forms to their bank. These forms include Form 15G and Form 15H. By doing so, you can request the bank not to deduct tax on the interest if your taxable income falls below the tax-exempt limit.
Form 12BBA for Senior Citizens Aged 75 and Above:
Starting this year, senior citizens aged 75 years and above, who do not wish to file income tax returns, can submit Form 12BBA to their bank. This form allows them to be exempt from filing income tax returns altogether.
Eligibility Criteria for Exemption:
To be eligible for the income tax return exemption, senior citizens must have income only from interest on pension and fixed deposits. Additionally, the pension and fixed deposit should be held in the same bank. Form 12BBA requires various details to be filled in, including deductions under sections 80C to 80U, tax rebate under section 87A, and total income from interest on fixed deposits and FDs.
How it Works:
Once the form is submitted, the bank calculates the total income of the taxpayer. This calculation considers tax deductions and rebates under section 87A, deducting the applicable tax from the final income based on the slab rate.
Assistance from Banks:
The Central Board of Direct Taxes (CBDT) has instructed banks to assist senior citizens in filling out Form 12BBA. This support ensures a smooth process, as senior citizens often find it challenging to navigate the ever-changing rules of income tax filing.
Benefits of Submitting Form 12BBA:
Apart from the exemption, submitting Form 12BBA offers additional advantages for senior citizens. One such benefit is the elimination of concerns regarding the refund of tax deducted on FD interest. If a senior citizen aged 60 years and above has an interest income exceeding Rs 50,000 in a financial year, the bank will deduct 10% TDS. However, by submitting Form 12BBA, the taxpayer will only have to pay a reduced tax amount of Rs 52,500, thereby receiving a refund of Rs 17,500.
20% Tax Penalty for Failure to Submit PAN Card:
If a depositor fails to submit their Permanent Account Number (PAN), a higher tax rate of 20% will be levied on the FD interest. In cases where the interest received is within the exemption limit, but the bank still deducted TDS, taxpayers can claim a refund while filing their income tax return.
The recent income tax exemption for senior citizens provides a valuable opportunity to avoid paying 10% TDS on FD interest. By following the necessary steps, such as submitting the required forms and seeking assistance from banks, senior citizens can enjoy a hassle-free tax filing experience. Take advantage of this breakthrough and maximize your tax benefits today.