Earning Over Rs 1 Lakh From FDs? Here’s How Retirees Can Avoid TDS Under New Regime

Senior citizens often rely on fixed deposit (FD) interest as a primary source of income. However, once the interest earned crosses Rs 1 lakh in a financial year, banks are required to deduct Tax Deducted at Source (TDS), even if the individual’s actual tax liability is zero. This automatic deduction can affect retirees' cash flow. Fortunately, there's a way out—Form 15H can help avoid this deduction.

Form 15H is a self-declaration form that senior citizens aged 60 years or more can submit to their bank or financial institution. By filing this form, they declare that their total income falls below the taxable limit, making them not liable to pay income tax. As a result, banks are instructed not to deduct TDS from their interest earnings. This saves retirees from the inconvenience of filing returns just to claim a TDS refund.

Under the new income tax regime, a major relief has been provided for senior citizens. If their total income does not exceed Rs 12 lakh in a financial year, they are eligible for a full rebate under Section 87A. This brings their tax liability down to zero. In such cases, submitting Form 15H allows them to avoid TDS on FD interest, even if the interest amount surpasses Rs 1 lakh.

Banks have an obligation to deduct TDS automatically when interest from fixed deposits exceeds Rs 1 lakh, irrespective of whether tax is actually payable. This can cause financial strain for retirees, especially those living on limited monthly income. By filing Form 15H at the start of the financial year, senior citizens can prevent these deductions and retain full control over their income.

To submit Form 15H, the individual must be a resident of India and at least 60 years old. Their estimated total income—including all sources like pension, rent, and other investments—must be below the taxable threshold for the year. If they meet these conditions, they can request banks not to deduct TDS on FD interest. This is particularly useful for retirees whose primary income comes from interest but whose total income is still below the tax limit.

It is essential for senior citizens to accurately estimate their total income before filing Form 15H. Any mistake—such as underreporting income—could lead to false declaration. If the total income exceeds Rs 12 lakh and TDS was wrongly avoided using Form 15H, the individual may face penalties under the Income Tax Act. Therefore, retirees must calculate all income sources carefully before submitting the form.

Under the old tax regime, the basic exemption limit for senior citizens is Rs 3 lakh, while under the new regime, it is Rs 4 lakh. This distinction impacts the eligibility for Form 15H. A senior earning Rs 4.5 lakh under the new regime may be taxed, while under the old regime, they might qualify for deductions and remain exempt. Choosing the right regime and checking the exemption limits are crucial before deciding to submit the form.