Posted in Banks, Financial Institutions, Form 15G/H, RBI, Section 197A of the Income Tax Act, Slogging, Tax

Submission of Form 15G/H under Section 197A of the Income Tax Act, 1961-2015 – Are the provisions of the said section followed in the right spirit?

In this blog, let us try to understand the provisions of section 197A of the Income Tax Act, 1961-2015 (hereinafter referred to as the Act), and thereafter evaluate whether the assessee, as well as, the payer (especially banks) are following the provisions of the said section in the right spirit or not. It’s been a long time since this section was first introduced, but till date, a lot of the assessee’s are not aware that whether they are eligible to submit the prescribed form i.e. Form 15G/H or not. At the same time, a lot of the assessee’s ‘knowingly’ that they are not eligible, still submit the declaration in the Form 15G/H. As far as, payers are concerned let us find out whether, as per the provisions of the Act, Form 15G/H is required to be submitted ‘once in a year’ or else is it required to be submitted ‘every time’ a new Deposit is opened by the same account holder (which is the current practice followed by a lot of banks). I hope this blog will bring more clarity on the section 197A of the Act, as well as, answer all the questions raised above.

Section 197A – Section 197A of the Act, deals with the provision concerning the non-deduction of tax at source in certain cases, if a written declaration in duplicate, in the prescribed format, is furnished by the individual/person, as the case may be, to the person responsible for paying any income under section 193 (Interest on securities), 194 (Dividend Income), 194A (Interest other than interest on securities), 194EE (Payment under National Saving Scheme, etcetera) and 194K (Income from units), as specified in the relevant sub-sections.

Section 197A (1) – As per section 197A (1), no tax shall be deducted at source, in case of an individual, who is resident in India, on the income received under section 194, 194EE, if such individual furnishes to the payer a declaration in writing in duplicate in the prescribed form to the effect that tax on his/her estimated total income of the previous year (including the income under the above-mentioned sections) in computing his/her total income will be nil. (Source: Website of Income Tax Department, Government of India: www.incometaxindia.gov.in)

Section 197A (1A) – As per section 197A (1A), no tax shall be deducted at source, in case of a person, (not being a company or firm), on the income received under section 193, 194A and 194K, if such person furnishes to the payer a declaration in writing in duplicate in the prescribed form to the effect that tax on his/her estimated total income of the previous year (including the income under the above-mentioned sections) in computing his/her total income will be nil. (Source: Website of Income Tax Department, Government of India: www.incometaxindia.gov.in)

Section 197A (1B) – As per section 197A (1B), the assessee cannot furnish the above mentioned declaration if the aggregate amount of the income under section 193, 194, 194A, 194EE and 194K, during the previous year in which such income is to be included, exceeds the maximum amount which is not chargeable to income tax.

Form 15G/H – The prescribed form that is required to be furnished to the payer in writing in duplicate are commonly known as Form 15G/H, wherein, Form 15H is to be submitted by a senior citizen who is of the age of sixty years or more at any time during the previous year, while 15G form is to be submitted by any other individual/person (other than a senior citizen), who is eligible as per the provisions of section 197A of the Act.

Assessee’s who are eligible to submit a declaration in Form 15G/H – In order to be an eligible assessee for submitting the declaration in Form 15G/H as per the section 197A of the Act, two things need to be satisfied. Firstly, as per section 197A (1) and 197A (1A), the tax on the estimated total income of the previous year (including the income specified under the said sections) in computing the total income should be nil. Secondly, as per section 197A (1B), the aggregate amount of the income under section 193, 194, 194A, 194EE and 194K, during the previous year, should not exceed the maximum amount which is not chargeable to income tax.

Hence, from the above-mentioned explanation, it is it is very much clear that even if the tax on the estimated total income of the previous year is nil, but if the aggregate income under section 193, 194, 194A, 194EE and 194K exceeds the maximum amount chargeable to income tax then the assessee is not eligible to submit the declaration under section 15G/H as per section 197A of the Act. Please note that any person, who is found making a false statement in the declaration, is liable to be prosecuted and punished under section 277 of the Act.

What should be the frequency to submit Form 15G/H – In the Form 15G/H, the assessee makes a declaration, as per section 197A (1) and 197A (1A), to the effect that tax on his/her estimated total income of the previous year (including the income specified under the said sections) in computing his/her total income will be nil, as well as, also declares, as per section 197A (1B), that the aggregate amount of his/her income under section 193, 194, 194A, 194EE and 194K, during the previous year, will not exceed the maximum amount which is not chargeable to income tax. Thus, the plain reading of the content of Form 15G/H in itself clarifies that it’s a yearly declaration that is made by the assessee to the respective payer.

However, the current practice adopted by a lot of banks is that they demand submission of Form 15G/H ‘every time’ a new Deposit is opened by the same account holder, even if the account holder has already submitted the respective Form 15G/H earlier (mostly at the start of the respective financial year). In absence of that, they deduct tax at source on the new deposit account, so created post submission of the Form 15G/H.

Although, the Form 15G/H requires the declarant to submit the complete details of shares, securities, sums given on interest, a withdrawal made from National Saving Scheme, etcetera, as held or withdrawn on or up to the date of the submission of the form. But could this be the reason of demanding the submission of Form 15G/H ‘every time’ a new Deposit is opened by the same account holder? None of the provision of section 197A of the Act specifies that ‘every time’ the assessee invests/withdraws an amount he/she is required to submit the declaration in Form 15G/H to the respective payer. Then on what basis the banks are following this practice of demanding submission of Form 15G/H ‘every time’ a new Deposit is opened by the same account holder, who has already submitted the respective form for that particular previous year, is the question that the learned and respected officers of the banks should answer in order to clarify this issue, once for all.

Also, many banks don’t give the receipt/copy of Form 15G/H submitted by the account holder. This act not only tantamount to infringement of the right of the customer to get a receipt of every transaction made by them, but at the same time, it also depicts that the officer concerned wants to merely shed away their responsibility of being answerable in case necessary actions are not taken by them in the matter concerned. Is this a professional behaviour on the part of the financial institutions, which boasts about stringent policies and procedures?

I would like to end this blog with the hope that every individual/person concerned; Banks, Reserve Bank of India (RBI) takes note of the serious issues highlighted in this blog, as well as, takes necessary actions as required at their end, so that the section 197A of the Act is ultimately followed in the right spirit.

 

Peyush Jain