Want to avoid TDS on fixed deposit interest? This could come as relief for retirees under New Tax Regime

Senior citizens have an effective tool in Form 15H, which can help them prevent Tax Deducted at Source (TDS) deductions on interest earned from fixed deposits exceeding Rs 1 lakh. Under the new income tax regime, if a senior citizen's income is up to Rs 12 lakh, they can file Form 15H with their bank to avoid this deduction. This provision aids those with limited income but significant interest earnings, ensuring they do not face unnecessary deductions.

The New Tax Regime offers a notable benefit for seniors with income up to Rs 12 lakh, including a Section 87A rebate that results in nil tax liability. Filing Form 15H is a declaration that one's total income is below the taxable limit, thereby preventing TDS on interest earned from fixed deposits. It addresses the issue where banks automatically deduct TDS once interest income surpasses Rs 1 lakh due to compliance obligations, regardless of the taxpayer's actual liability.

What is Form 15H?

Form 15H is a self-declaration form that senior citizens (aged 60 years and above) can submit to banks or financial institutions to request non-deduction of tax deducted at source (TDS) on interest income from fixed deposits (FDs). This form is especially useful for retirees who depend on FD interest as a primary source of income and want to avoid TDS deductions that could otherwise block their cash flow.

By submitting Form 15H at the beginning of the financial year, eligible individuals declare that their estimated total income for the year will fall below the taxable threshold, and hence, they are not liable to pay any income tax. This spares them the inconvenience of claiming TDS refunds later by filing income tax returns.

"Under the new tax regime, the tax liability for individuals with an income of up to Rs 12 lakh is now nil from the financial year 2025-26. This provides a significant relief for taxpayers, especially senior citizens, as it eliminates the tax burden for those earning within this threshold. As a result, senior citizens whose income does not exceed Rs 12 lakh are eligible to file Form 15H to avoid the deduction of Tax Deducted at Source (TDS) on interest income from fixed deposits (FDs). Form 15H is beneficial for senior citizens who rely on FD interest for their regular income and wish to avoid unnecessary TDS deductions, which would otherwise require them to file an income tax return to claim a refund," said CA Mohammed Chokhawala, Tax Expert, ClearTax.

What should senior citizens note? 

However, it's crucial for individuals to accurately estimate their total income—including pension, rent, or other sources—before submitting the form. If the income exceeds Rs 12 lakh, they may fall under a taxable bracket, and TDS will rightfully apply on FD interest. Submitting Form 15H in such cases could be considered a false declaration and attract penalties under the Income Tax Act.

"The eligibility for Form 15H hinges on two key conditions: the individual must be a resident senior citizen (60 years or older), and their estimated total tax liability must be nil for the financial year in question. To complement this relief, the government has also raised the TDS threshold on interest income for senior citizens from Rs 50,000 to Rs 1 lakh annually. This move significantly reduces the administrative burden for many retired individuals relying on interest income, and will likely reduce the number of unnecessary TDS deductions and refund claims," said Niyati Shah, Vertical Head - Personal Tax at 1 Finance.

Eligibility to file Form 15H differs between the old and new tax regimes. Under the old regime, the basic exemption limit is Rs 3 lakh, and seniors above this cannot file Form 15H. However, under the new regime, the limit is Rs 4 lakh. This means seniors with income just above Rs 4 lakh under the new scheme might not qualify to file the form. Therefore, it is essential for seniors to evaluate their income and the applicable tax regime carefully.

"It's important to underline a crucial compliance obligation: submission of Form 15H does not absolve one from filing Income Tax Returns (ITR). All income, including interest from fixed deposits, must be accurately disclosed, even if the tax liability is ultimately Nil. Submitting Form 15H based on incorrect estimates, or failing to file ITR when required, could attract to penalties or notices from the Income Tax Department. Therefore, this provision offers substantial relief and simplification for senior citizens under the new tax regime. But with relief comes responsibility - it is essential to ensure accurate income disclosure and timely ITR filing to remain tax compliant," Shah added.