Jigar M. Patel
International Tax Attorney
Section 197A of the Income-tax Act deals with provisions granting relief from deduction of tax at source (TDS) in certain cases. This section primarily allows a person (not being a company or a firm) to receive specified incomes such as interest, dividend, rent, insurance proceeds etc. without deduction of tax at source, subject to fulfilment of specified conditions and prescribed procedures.
Form 15G and 15H Declarations for availing Relief
For purpose of availing the aforesaid relief, eligible persons are entitled to file a self-declaration in the prescribed Form 15G with persons responsible to pay specified incomes beyond the threshold limits, who are under obligation to deduct TDS. In case of resident senior citizens, the form prescribed is 15H.
Under Forms 15G and 15H, the person is required to declare that the tax on his estimated total income for the relevant financial year will be Nil. Keeping in view the basic income-tax exemption limit under the new tax regime for FY 2025-26 being Rs. 4 lakhs (Rs. 2.5 lakhs under the old regime), the tax on incomes below these exemption limits would be Nil and therefore, quite logically, the common understanding is that such declarations would be accepted by deductors only in cases where the declaration specifically mentions that the estimated total income does not exceed the aforesaid exemption limits.
Special Privilege for Resident Senior Citizens
The provisions under section 87A granting the benefit of tax rebate against tax payable by resident individuals subject to specified conditions came to be introduced with effect from FY 2019-20. Accordingly, until the FY 2022-23, considering the benefit of 87A rebate, an eligible taxpayer having total income of less than Rs. 5 lakhs, effectively enjoyed the benefit of zero tax. For FYs 2023-24 and 2024-25, the income limit for rebate was raised to Rs. 7 lakhs and from the current FY 2025-26, the same has been revised to Rs. 12 lakhs.
While the 87A rebate relief does not come to the aid of persons filing declarations in Form 15G, there is good news for resident senior citizens submitting Form 15H. Seniors with total incomes below Rs. 12 lakhs are very much entitled to enjoy the privilege of zero deduction from tax by submitting Form 15H in appropriate cases.
For the above purpose, reliance can be placed on the CBDT Notification dated 22nd May, 2019, which amended the relevant note in Form 15H, adding the proviso that the Deductor required to make TDS shall accept the declaration in a case where total income of the resident senior citizen is higher than the prescribed income-tax exemption limit, but his tax liability works out to Nil, taking into account the eligible 87A rebate in his case.
Word of Caution for Seniors earning Capital Gains
It needs to be noted that the privilege granted to senior citizens to file Form 15H, in case of their total income being more than Rs. 4 lakhs, but less than Rs. 12 lakhs, is subject to the logical presumption that they do not have any estimated short-term equity gains or any other long-term capital gains (LTCG), which are taxable and in respect of which, no benefit of tax rebate is available.
Few Absorbing Insights on Capital Gains
In a case where the LTCG from equity shares or units does not exceed Rs. 1.25 lakhs or where the long-term or short-term gain is entitled to set-off against any brought forward loss, a senior citizen eligible for 87A rebate can still submit Form 15H. The logical contention in such cases would be that no tax being payable in the above situations, the question of non-eligibility of 87A rebate would not arise.
