We often park our hard-earned money in bank fixed deposits (FDs) or savings accounts to earn some interest. However, there are instances where, despite your total annual income falling below the taxable threshold, the bank still deducts TDS (Tax Deducted at Source) on the interest earned. If you are facing this situation, the Income Tax Department offers options to ensure not a single penny is deducted. Additionally, a major rule change has been introduced starting from the 2026-27 financial year, where a new form has replaced the older ones. Meanwhile, if you assume that filing an Income Tax Return (ITR) is unnecessary because you have no tax liability, such negligence could prove costly.

**Understanding the mechanics of TDS-exemption forms**
To prevent TDS deduction on interest earned from banks, post offices, or other financial institutions, one must submit a self-declaration form. Until now, two primary forms have been in use. The first is Form 15G, intended for citizens under the age of 60 and Hindu Undivided Families (HUFs); it is filed when your total income is below the basic tax exemption limit and your estimated tax liability is zero. The second is Form 15H, designed specifically for senior citizens aged 60 or older. Since retirees often rely on FD interest for income, this form ensures that the limited earnings of seniors with no tax liability remain intact.

**Old rules changed this year**
If you are wondering how to select the correct form based on your age, note that a significant change has been made under the Income Tax Act of 2025. Starting from the 2026-27 financial year, Forms 15G and 15H have been discontinued and replaced by a new 'Form 121'. Taxpayers no longer need to be confused by multiple forms; there is now a single, unified form. If your tax liability is nil, you simply need to submit Form 121 to your bank, EPFO, mutual fund, or post office to prevent TDS deduction on your interest income.

**What to do if tax is deducted by mistake**
Banks often deduct TDS due to a lack of correct information or a failure to submit the required form on time. There is no need to panic in such situations. The straightforward and secure way to recover the deducted amount is to file an Income Tax Return (ITR). You can check your Form 26AS or Annual Information Statement (AIS). Subsequently, when filing your return, provide accurate details regarding your interest income and claim credit for the TDS. If your final tax liability works out to be zero, the Income Tax Department will refund the entire excess amount deducted to your bank account.

**Hefty penalty for not filing a return**
People often assume that if they have no tax liability, there is no need to go through the formality of filing an ITR. However, this mindset could lead to a significant financial blow. Failure to file a return can attract a penalty of up to ₹5,000. Furthermore, if you have incurred business losses or capital losses, you will not be able to carry them forward to future years without filing a return.

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