Cheer! There are payments on which TDS isn’t deducted
Have you been sobbing at the thought of taxes deducted even before the payments have been made to you? But you can plan your investments and take specific measures if you know the areas where tax isn’t deducted at source.
Don’t let the finance minister’s move of bringing recurring deposits and co-operative bank deposits under the tax deduction at source (TDS) ambit in this Budget, dampen your investments. Even though fixed deposit interest accumulated at all the branches of the bank would be considered to compute the TDS payment starting financial year 2015-16, there are many other investments where taxes still won’t be deducted before they are handed over to you.
Gains in the form of interest o appreciation on many investments would still be untouched by the tax axe at source.
Though bank fixed deposits, recurring deposits (starting FY 2015-16) and co-operative bank deposits would be attracting TDS, if interest credited is beyond Rs. 10,000 a year, your savings bank account interest is credited to your account without deduction of taxes at source.
A majority of the government managed deposits including postal savings too don’t attract TDS. So, your Public Provident Fund maturity amount or the savings schemes such as KisanVikasPatra, Indira VikasPatra, Postal Monthly Income Scheme wouldn’t be subjected to TDS before they land in your kitty.
One exception has been made under the small savings scheme option under the Senior Citizen savings scheme, where a 10% TDS is deducted if the interest amount exceeds Rs. 10,000.
Mutual Funds and insurance
If you have redeemed equity mutual fund units in the past you would have noticed that the proceeds are given out sans TDS deduction. But the TDS-free redemption is offered only to resident Indians. NRIs looking to sell units would however get their payments after TDS deduction.
The maturity amount from life insurance policies is distributed without any tax deduction at source, provided they meet certain conditions. One should also ensure that the premium paid each year for policies issued after April 1, 2012 is 10% of the sum assured (20% for policies issued before March 31, 2012). If the premium exceeds this limit then maturity amounts received on policies would be taxable.
Hitherto there was no TDS deduction on such maturity proceeds, but the Budget 2014 introduced a new section 194DA, under which a 2% TDS would be deducted on policies where premium exceeds the limits mentioned. This TDS would be deducted only on payments, including bonus, crossing the mark of Rs. 1 lakh.
Health and car insurance claim payments aren’t subjected to TDS too.
Though the rate of TDS for various payments and investments is prescribed, one should note that the applicable rate can be hiked to 20% in the absence of a permanent account number. So, if you haven’t updated the PAN number with the bank or the insurance company, you should immediately take steps to avoid a higher TDS pie impacting your payments.
To escape TDS
If you wish to receive payments and interests without the TDS snip, then you can resort to the Forms 15 G or 15H to request no deduction of tax at source. These forms need to be submitted before the start of the new financial year, every year. A person who has submitted these relevant forms would not have to suffer TDS deduction even if the interest exceeds the ceiling of Rs. 10,000.
However, fill these forms only if your income is below the threshold limit which is Rs. 2.5 lakhs for general tax payers, Rs. 3 lakhs for senior citizens (above 60 years) and Rs. 5 lakhs for very senior citizens (above 80 years). A false declaration can even land you in imprisonment for a period stretching between three months to seven years.