My mother, a senior citizen, made fixed deposits at several banks and earned interest totaling Rs 3.30 lakh, exceeding the income tax exemption limit of Rs 3 lakh. To lower her taxable income and benefit from Section 80C, she invested Rs 45,000 in the Senior Citizen Savings Scheme (SCSS). Despite submitting Form 15G to the bank, requesting no tax deduction, they deducted tax at 20% on her interest income due to her not having a PAN. We have been advised to file her Income Tax Return (ITR) to claim the refund. Is it possible for the bank to disregard the 80C documentation to avoid tax deduction? How can she recover the deducted tax? Additionally, can she file a return without a PAN?
Name withheld
Since your mother is a senior citizen, she should have submitted Form 15H instead of Form 15G. Senior citizens can use Form 15H if their total tax due is zero. Thus, if there is no tax liability after accounting for deductions under Section 80C, she could have utilized Form 15H. The bank cannot consider proof under Section 80C during TDS deductions.
Per Section 206AA, because your mother lacks a PAN, the bank was obligated to deduct taxes at a rate of 20% on her interest income, even with the submission of Form 15G. To obtain a refund of the tax that has already been deducted by the bank, she needs to file her income tax return (ITR). However, without a PAN, your mother is unable to file her ITR. Therefore, you will first need to apply for a PAN on her behalf. If she has an Aadhaar number, it can be used instead of a PAN.
Please communicate this information to the bank and request them to update the TDS return to include her PAN or Aadhaar number. It’s crucial that the bank links her Aadhaar or PAN with her name and submits the revised TDS return so she can receive the credit for the tax that was deducted. It’s not always mandatory to file an income tax return if you possess a PAN.