We expect the Union Budget 2015 to take a small step in making life easier for the bank depositors, especially senior citizens, with respect to deduction of TDS on interest.
Today banks are not required to deduct TDS (Tax deducted at Source) on interest paid on savings accounts but if the interest paid exceeds Rs.10,000/- per annum on an FD, then the bank is obligated to deduct TDS. While it is a reasonable measure to front-end the collection of taxes, it would be a lot better if the budget tried to simplify this process. It will reduce the burden on banks and also save senior citizens living on interest income from the procedural hassles.
Firstly, the limit of Rs.10,000 per annum was set in 2007-08 and it is time for updating the limit. We hope that this budget will make a start by raising the limit to Rs.50,000 per annum. By raising the limit for deduction to Rs.50,000 , the bank is saved on the paperwork and procedural hassles, depositors are saved on the trouble of submitting Form 15G/15H and the task becomes easier for everyone. Quite often, depositors commit errors while filling up their PAN numbers in Form 15G/15H, which results in a higher rate of TDS deduction. And then the depositor has to go through the hassle of claiming the refund from the Income Tax department, which is another long process, altogether.
This budget can make a start on two fronts. Firstly, raise the TDS exemption limit to Rs.50,000 for bank fixed deposits as it would make the task substantially easier for depositors and senior citizens. The Budget can also consider making online filing of 15G and 15H mandatory so that the process is simplified and the scope for errors are substantially reduced. Senior citizens will surely be a pleased lot if that happens.