As per the Central Board of Direct Taxes (CBDT) notification, senior citizens can now request for an exemption from TDS on deposits and interest income. Senior citizens whose taxable income is up to Rs 5 lakh will qualify for the TDS exemption.
Senior citizens will need to submit Form 15H in post offices and banks to make TDS exemption claims. Previously, the limit for claiming a TDS exemption was Rs 2.5 lakh.
In advance to the budget announcement, CBDT has given out a notification to amend Form 15H. A full tax rebate has been given to individuals who earn a taxable income of up to Rs 5 lakh annually.
With this new initiative, three crore middle-class taxpayers have been benefitted.
As per the CBDT amendments, financial institutions and banks will acknowledge Form 15H received from assesses who have their tax liability as “nil” post considering the rebate they qualify for according to the Section 87A under the Income Tax Act, 1961.
Form 15H needs to be submitted at the beginning of the FY by senior citizens who are beyond 60 years of age to make sure tax is not deducted at source on interest income.
Previously, the rebate under Section 87A was Rs 2,500. After the Interim Budget 2019, the rebate has been revised to Rs. 12,500 to render tax relief to all of the taxpayers who are earning an income of up to Rs 5 lakh annually.
Without this amendment in place, taxpayers who earn an annual income of up to Rs 5 lakh will suffer TDS on interest received from banks. Also, they will end up filing a tax return for claiming refunds of TDS.
There are two benefits to this amendment; firstly, taxpayers need not file an ITR for claiming a refund; secondly, there is a lesser burden on the Central Processing Centre (CPC) to process such kind of ITRs and issue refunds.