Form 15G and Form 15H

Tax deduction at source is a collection mechanism, not a judgement about whether someone owes tax. A payer deducting on interest or a provident fund withdrawal applies a rate to the payment without knowing anything about the recipient's total income. For a person whose tax for the year will be nil, that produces a deduction against a liability that will never exist, recoverable only by filing a return and waiting for a refund.

These declarations head that off. The recipient tells the payer, in a prescribed form, that tax on their estimated total income for the year will be nil and that no tax should therefore be deducted. The payer stops deducting.

The forms changed on 1 April 2026. For tax year 2025-26 and earlier there were two, under section 197A of the Income-tax Act, 1961: Form 15G for people below sixty and Form 15H for senior citizens. From tax year 2026-27 there is one, Form 121, prescribed by rule 211 of the Income-tax Rules, 2026 under section 393(6) of the Income-tax Act, 2025. The distinction did not disappear, it moved: Form 121 asks at field 5(a) whether a resident individual was aged sixty or more at any time during the tax year, and the answer changes which conditions apply.

Two things about their nature are worth stating plainly, because both are widely misunderstood. The declaration is given to the payer, not filed with the department, though the payer then reports it onward. And it does not make the income exempt. It only stops the withholding.

Section 393(6) sets it out as a table of who may declare, against which payments.

• A resident individual may declare against payment of an accumulated provident fund balance under section 392(7), insurance commission, rent, income in respect of units, interest, payment under a life insurance policy, and dividend.
• Any other person not being a company, a firm, or an individual already covered may declare against the same list except dividend.

Non-residents are not within the table and cannot use it.

The condition on the face of the sub-section is that tax on the declarant's estimated total income of the tax year will be nil. A second condition sits in the Note below the table: the sub-section does not apply where the aggregate of the specified income credited or paid, or likely to be credited or paid, during the tax year exceeds the maximum amount not chargeable to tax.

That second condition is where the age question bites, and it is the point most often missed. The Note carves out a resident individual who is of the age of sixty years or more at any time during the tax year. A senior citizen is therefore subject only to the nil-tax test, while everyone else must also stay within the aggregate bar. That is precisely the difference that used to be expressed by having two forms, and it survives intact inside one.

The practical consequence for someone under sixty: a person whose tax is nil only because of deductions and rebates, but whose interest income by itself exceeds the maximum amount not chargeable to tax, fails the second condition and cannot declare even though they will owe nothing. Confirm the current limits before applying either test, since they move with the Finance Act.

Most discussion of these forms is about bank interest, which has nothing to do with payroll. They reach payroll and human resources through two routes.

The first, and the one that comes up regularly, is premature provident fund withdrawal. Where a member withdraws with less than the qualifying period of continuous service and the amount crosses the notified threshold, tax is deducted on the accumulated balance under section 392(7). A member whose tax for the year will be nil, which is common where the withdrawal follows a period of unemployment, can furnish this declaration to stop that deduction. That payment is the first item in the section 393(6) table, so the route is express rather than inferred. Telling leavers this exists is a small kindness with a real cash effect.

The second is deposits and loans within the organisation. Where an employer or a group entity pays interest to employees on deposits, the same mechanism applies to that interest.

What it does not do is affect salary. Tax on salary is deducted under section 392(1) on an estimate of the whole year's income, and salary does not appear in the section 393(6) table at all. An employee with low salary income simply falls below the threshold in the employer's own computation, and no declaration is required or accepted for it.

The payer stops deducting, and the obligation shifts rather than disappearing. Rule 211 and section 393(7) between them set out what the payer then owes.

• The declaration may be furnished electronically after verification through an electronic process, or in paper form.
• The payer allots a unique identification number to each declaration received in a quarter, following the procedures and formats specified by the Director General of Income-tax (Systems).
• The payer reports the particulars and the unique identification number in the quarterly statement under rule 219, regardless of the fact that no tax has been deducted in the quarter. A quarter with nothing deducted is not a quarter with nothing to file.
• Under section 393(7) the payer also delivers one copy of the declaration to the prescribed income-tax authority, on or before the seventh day of the month immediately following the end of the quarter in which it was furnished. Note the history here, because the older position is still widely quoted: as originally enacted the sub-section required a copy to the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner every month. The Finance Act, 2026 substituted it, and the obligation is now quarterly and runs to the prescribed authority.
• An income-tax authority may require the declaration to be produced for verification at any time before the end of seven years from the end of the tax year in which it was received, so that is the period it has to be retained for.

The declaration covers that payer and that year. It has to be given again next year, and separately to every payer.

For the declarant, getting it wrong is not trivial. A declaration made falsely, to avoid deduction on income that is in fact taxable, carries exposure to penalty and prosecution for a false statement in a verification. The form is for people whose tax will genuinely be nil, not for people who would rather not have tax withheld.

It also remains true that stopping deduction does not settle the tax. If the year turns out differently from the estimate, the tax is payable, and with no deduction against it the whole amount falls due at filing, possibly with interest for shortfalls in advance tax.

The recurring errors are eligibility errors rather than paperwork errors.

• Filed by someone whose tax will not be nil, on the assumption that it is a way of deferring tax. It is not, and it carries exposure.
• The second condition ignored by someone under sixty, where tax is nil but the specified income by itself exceeds the maximum amount not chargeable to tax. A senior citizen is outside that bar; a person of fifty-nine is not.
• Filed by a non-resident, who is not in the section 393(6) table at all.
• Filed without a valid permanent account number. Where no number is available, deduction at the higher rate under section 397(2)(b)(i) applies, subject to the relief rule 217 gives non-residents on furnishing specified details.
• Filed once and assumed to run indefinitely, when it lapses with the year.
• Filed with one payer and expected to bind another, when each payer needs its own.
• Still filed as two forms. From tax year 2026-27 there is one Form 121, and a payer's process that routes people to a different form by age is now sorting them into a form that does not exist.

An employer receiving one of these declarations is a payer with its own obligations, and accepting it is not neutral.

• Check the declarant is within the section 393(6) table for the payment being made, and that a valid permanent account number is quoted.
• Check the age answer at field 5(a), because it decides whether the aggregate condition applies at all.
• Check the declaration is for the current tax year and covers the payment being made.
• Allot the unique identification number and carry the particulars into the quarterly statement under rule 219, rather than filing the paper away, and file even where nothing was deducted.
• Deliver the copy required by section 393(7) to the prescribed income-tax authority by the seventh of the month following the end of the quarter, not the month.
• Retain the declaration for seven years from the end of the tax year in which it was received.
• Where the declaration is plainly inconsistent with what is known about the recipient, ask before acting on it. A payer that stops deducting on an obviously ineligible declaration has its own short deduction exposure.