The Kerala High Court has ruled that a bank cannot be treated as an “assessee in default” for not deducting TDS (tax deducted at source) on interest paid to senior citizens, as long as the bank has accepted valid Form 15H declarations from them. Form 15H is a self-declaration submitted by senior citizens stating that their total taxable income for the year will be zero.
What the Court Examined
A bench of Justices A. Muhamed Mustaque and Harisankar V. Menon looked into whether a bank can be punished for not deducting TDS when senior citizen depositors have already submitted Form 15H. Under Section 197A(1C) of the Income Tax Act:
- A senior citizen (60+ years) can give a declaration in Form 15H stating that they do not expect to owe any tax for that financial year.
- If the bank receives this form, it does not need to deduct TDS on interest paid to them.
Normally, under Section 194A, banks must deduct TDS on interest. But Section 197A(1C) creates a special rule for senior citizens.
What Happened in This Case
Senior citizens submitted Form 15H to the bank. The bank did not deduct TDS, as permitted by the law. The bank also submitted these forms along with its TDS returns. However, later the tax authorities issued notices saying the bank should be treated as an “assessee in default”, claiming the bank should have deducted TDS because the interest amounts were higher than the basic exemption limit.
Their argument was based on Footnote No. 10 in Form 15H, which they interpreted to mean that banks must check whether the senior citizen actually qualifies for zero tax after considering deductions and other factors.
Why the Court Disagreed
The High Court rejected the tax department’s view and explained:
- Footnote No. 10 would force banks to calculate each depositor’s deductions, losses, and tax liability.
- This is not possible for banks, as they do not have access to all financial details of a customer.
- The law does not require banks to verify whether the depositor has correctly calculated their tax.
- Form 15H itself does not ask for details of deductions or losses.
- The purpose of Form 15H is to make life easier for senior citizens. If banks have to verify everything, the entire purpose gets defeated.
The Court also said that using Footnote No. 10 in this way amounts to an excessive use of delegated power, meaning it adds extra requirements not intended by the main law.
Final Decision
The Court allowed the bank’s appeal and ruled that if a senior citizen submits a valid Form 15H, and the bank accepts it in good faith, then the bank cannot be held responsible or treated as an “assessee in default” for not deducting TDS.
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