Form 121 vs 15G/15H: TDS Exemption and Income Certification

TDS exemptions confuse many because India uses overlapping forms (121, 15G, 15H) for similar purposes. Form 121 is new as of AY 2023-24 and replaces the old "Declaration" under Section 197. This guide clarifies when to use each form, who can file, and how to avoid penalties.

TDS Exemption Forms at a Glance

Form 121: Pre-Filing TDS Exemption (Employer Use)

What Is Form 121

Form 121 is a certificate filed by the employer (with employee declaration) claiming TDS exemption under Section 197 for the entire financial year. It means:

• Employee will have no tax liability in current FY based on income projection
• Employee has no unpaid tax from prior financial years
• Therefore, TDS is unnecessary

Employer files this with Income Tax Officer. Once approved, TDS is exempted for that employee for the entire financial year (or until revoked).

Who Can File Form 121

• Employees: Salaried individuals earning less than basic exemption limit (Rs 3 to 5 lakh depending on age/category)
• Non-residents: Foreign nationals earning income in India
• Senior citizens: If salary is below exemption limit
• Individuals with zero income: Those receiving gratuity, retirement benefit, or similar non-taxable payment

Cannot file Form 121:

• Business owners/self-employed (use Form 15G instead)
• Individuals with income >exemption limit
• Those with outstanding tax liability from prior years

How to File Form 121

Employee's Role:

• 1. Meet your employer's HR/Accounts department
• 2. Provide declaration (may be on employer's form) stating:
  • Name, PAN, Aadhaar, DOB
  • Estimated income for FY (breakdown by category: salary, bonus, leave encashment, etc.)
  • Certification that you have no tax liability from prior years
  • Declaration that information is true and correct
• 3. Employer countersigns and submits

Employer's Role:

• 1. Collect employee declaration
• 2. Verify employee PAN and salary details against payroll
• 3. Estimate total income (salary + bonus + allowances)
• 4. If income below exemption limit, file Form 121 with Income Tax Officer (online via e-filing)
• 5. Attach employee declaration as supporting document
• 6. ITI officer approves or asks for clarification

Timeline

• File before: 30 days before first TDS deduction
• Processing: 7 to 14 days
• Validity: Full financial year or until revoked by ITI officer

Example

Ramesh, aged 45, joins company in June 2026. Expected salary: Rs 40,000/month (Rs 2.4 lakh annual). Exemption limit: Rs 3.5 lakh.

• Employer files Form 121 by June 25
• ITI officer approves by July 5
• TDS is NOT deducted from June onwards
• At year-end (31 March 2027), actual salary = Rs 2.8 lakh (tax liability = 0)

Form 15G: Mid-Year TDS Exemption Declaration

What Is Form 15G

Form 15G is a self-declaration by individual to deductor asserting that income will not exceed exemption limit in current FY. It is filed after TDS has started being deducted but before year-end.

When you file 15G:

• Deductor stops TDS deduction immediately
• You take responsibility if actual income exceeds exemption limit
• You must file ITR even if exemption declared

Who Can File Form 15G

Any individual (salaried, self-employed, contractor, freelancer, NRI) who:

• Is >18 years old
• Expects income below exemption limit in current FY
• Has no tax liability from prior years
• Receives income from one or more deductors (salary, interest, contract fees, rent, etc.)

Cannot file 15G:

• If you have tax liability in prior year (even if already paid)
• If you expect total income to exceed exemption limit
• If you have outstanding refund claimed but not received
• Minors (age below 18 years)

How to File Form 15G

• 1. Download form from incometaxindiaefiling.gov.in or deductor's website
• 2. Fill details:
  • Name, PAN, Aadhaar, DOB
  • Deductor name and PAN
  • Estimated income breakdown (salary, interest, rent, fees, etc.)
  • Declaration of no tax liability in prior year
  • Your bank account (for any refund, if needed)
• 3. Sign (wet signature or e-sign)
• 4. Submit to deductor (employer, bank, consultant, landlord, etc.)
• 5. Deductor updates in payroll/payment system and stops TDS deduction

Timeline

• Can file anytime during FY (ideally within first 3 months)
• Deductor must stop TDS within 7 days of receiving 15G
• Valid for entire remaining FY

Example

Priya, freelancer, earned Rs 1.5 lakh from Project A in Apr-May 2026. Deductor (client) deducted 10% TDS = Rs 15,000. In June, she files Form 15G claiming no other income expected in FY.

• Client stops TDS from July onwards
• Priya's remaining 6 months income: Rs 2 lakh (no TDS deducted)
• Total income FY: Rs 3.5 lakh (within exemption limit)
• At year-end: Files ITR claiming Rs 15,000 TDS credit (no refund, tax zero)

Form 15H: Senior Citizen TDS Exemption

What Is Form 15H

Form 15H is similar to 15G but reserved exclusively for senior citizens (>60 years). It allows exemption from TDS on interest and rent income when total income is below exemption limit.

Who Can File Form 15H

• Individual aged 60+ years (male, female, transgender)
• Receiving interest income (bank FD, bond, debenture, post office schemes)
• Receiving rent income (property lease)
• Expected total income below exemption limit for senior citizen (Rs 5 lakh for AY 2024-25)
• No tax liability from prior years

How to File Form 15H

Process identical to Form 15G:

• 1. Download from bank/deductor website or ITI portal
• 2. Fill PAN, Aadhaar, DOB, estimated income
• 3. Declaration: "I am aged >60 years and expect no tax liability"
• 4. Submit to bank (for interest), landlord (for rent), or other deductor
• 5. Deductor exempts TDS from future deductions

Example

Rajesh, aged 65, has fixed deposits with bank earning Rs 3.5 lakh interest annually (Rs 20,000/month). Bank was deducting 10% TDS = Rs 2,000/month. In April, he files Form 15H.

• Bank stops TDS from May onwards
• Total deduction for FY: Rs 4,000 (Apr only)
• At year-end: 26AS shows Rs 4,000 TDS
• ITR filing: No refund due (tax liability zero, TDS covered)

Form 121 vs 15G vs 15H: Decision Tree

Do you expect NO tax liability in current FY?
├─ YES
│  ├─ Are you salaried employee?
│  │  ├─ YES → File Form 121 via employer (before salary starts)
│  │  └─ NO → Go to next question
│  ├─ Are you aged 60+ receiving interest/rent ONLY?
│  │  ├─ YES → File Form 15H with bank/landlord
│  │  └─ NO → File Form 15G with deductor (any income type)
└─ NO → Do NOT file exemption form; pay TDS, file ITR, claim credit

Common Mistakes and Penalties

Mistake 1: Filing 15G When You Have Tax Liability from Prior Year

Penalty: Rs 10,000-50,000 fine + criminal prosecution Example: You owed Rs 5,000 tax in AY 2024-25 (unpaid). In AY 2025-26, you file 15G falsely claiming no liability. Prevention: Check prior-year ITR filed and any outstanding demand notice.

Mistake 2: Filing 15G When Actual Income Exceeds Exemption Limit

Consequence: You claim TDS exemption but earn Rs 6 lakh (> Rs 5 lakh limit). Penalty: Rs 10,000-25,000 fine + interest on shortfall tax Prevention: Be conservative. If income uncertain, do NOT file 15G.

Mistake 3: Filing Form 121 Without Employer (False Claim by Individual)

Consequence: Individual claims 121 without employer filing it with ITI officer. Penalty: Form 121 is invalid (not recognized). TDS is still deducted. Prevention: Only employer files Form 121 based on your declaration.

Mistake 4: Filing Multiple 15G Forms with Different Deductors

Consequence: File 15G with employer (stop TDS from salary) AND 15G with bank (stop TDS on interest). Both deductors stop TDS. Total income = Rs 5.5 lakh (exceeds limit). Penalty: Shortfall tax + interest + possible prosecution Prevention: Coordinate with all deductors. Give only one 15G (primary income source). Inform others later.

Mistake 5: Not Filing ITR After Filing 15G

Consequence: You file 15G claiming no tax liability. At year-end, you do NOT file ITR. Penalty: Rs 5,000-10,000 penalty for non-filing ITR (even if no tax due) Prevention: ALWAYS file ITR after filing 15G. ITR proves the claim was correct.

Revoking or Withdrawing Exemption Forms

Can I Withdraw Form 121?

• Yes. If your income exceeds exemption limit midway, immediately inform employer.
• Employer asks ITI officer to revoke Form 121.
• TDS resumes from revocation date onwards.
• Employer deducts balance TDS for remaining months.

Can I Withdraw Form 15G/15H?

• Yes. Inform deductor in writing.
• Deductor resumes TDS from next payment onwards.
• Write formal email: "I withdraw my Form 15G dated [date] as my income is expected to exceed exemption limit."

Filing ITR After 15G/15H Exemption

Critical: Even if you file 15G/15H (TDS exemption), you MUST file ITR showing actual income.

Why File ITR After 15G

• Validates the exemption claim
• Updates income records with tax authority
• Enables future loans (banks check ITR history)
• Resolves any 26AS/income mismatch

How to File ITR After 15G

• 1. File ITR (same deadline: July 31 or extended date)
• 2. In ITR, mention 15G filing date and deductor details
• 3. Show income breakup (salary, interest, rent, freelance fees)
• 4. If actual income below exemption limit: Tax is zero, no refund claim
• 5. If actual income >exemption limit: File ITR anyway; accept tax and interest liability

Checklist: Should You File Exemption Form

• Estimated total income for FY is below exemption limit?
• No outstanding tax liability from prior financial years?
• No refund claimed in prior year but not yet received?
• You are >18 years old?
• If 15H: You are >60 years (only for interest/rent)?
• If 121: You are salaried employee?
• You can commit to filing ITR even if exemption claimed?
• If multiple deductors: You will coordinate exemption claims?

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Source: Income Tax Rules 2011, Section 197 (TDS exemption), Form 121/15G/15H notification (CBDT), Circular 2023 on TDS Exemption forms, Ministry of Finance, 2026.