Why One Should File Form 121 To Receive Income Without TDS: An Overview
· Free Press Journal
The Income-tax Act, 2025 has introduced several structural and procedural changes in tax administration in India. One of the important changes is the introduction of Form 121, which replaces the earlier Form 15G and Form 15H from Tax Year 2026-27 onwards.
What is form 121: Form 121 is a self-declaration form submitted by eligible taxpayers for receiving certain incomes without deduction of tax at source (TDS). The objective of the new form is to simplify the compliance framework by introducing a single declaration mechanism applicable to all eligible resident taxpayers irrespective of age. Form 121 is prescribed under Section 393(6) of the Income-tax Act, 2025 and Rule 211 of the Income-tax Rules, 2026. It replaces the earlier declarations filed under Section 197A of the Income-tax Act, 1961 in Forms 15G and 15H.
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Income-Tax Act 2025: Key Points Every Taxpayer Should KnowThe main purpose of Form 121 is to enable eligible taxpayers to declare that their estimated total income for the tax year is below the taxable limit and their total tax liability for the year will be NIL. Based on this declaration, the payer such as a bank, post office, EPFO, or other deductors will not deduct TDS on specified payments.
Who can file form 121: Resident Individuals, Senior Citizens, Hindu Undivided Families (HUFs) and Certain eligible trusts and entities having nil tax liability are eligible to submit Form 121. A taxpayer can file Form 121 only if the taxpayer is a resident in India and his estimated tax liability for the year is NIL. The declaration should be furnished before TDS is deducted by correcting quoting PAN. Non-Residents (NRIs), Companies, Partnership Firms, taxpayers having taxable income and actual tax liability are not eligible to file form 121.
Why file form 121: Form 121 may be submitted for non-deduction of TDS on incomes such as interest on bank fixed deposits, interest on savings accounts, interest on post office deposits, Dividend income, Mutual fund income, EPF withdrawals, Pension receipts, Insurance commission, Rental income, interest on securities and bonds, etc.. Form 121 can generally be submitted physically to the deductor or online through internet banking or the deductor’s portal wherever available.
The taxpayer must provide details of estimated income for which non-deduction of TDS is sought. The taxpayer must declare that the estimated total income is below the taxable limit and tax liability is NIL. The completed form should be submitted before the first payment or credit of income.
Consequences of non-filing: There is no statutory penalty merely for not filing Form 121. However, non-submission may lead to practical difficulties and financial inconvenience due to unwarranted deduction of TDS, necessity to file ITR to claim refund of TDS, higher TDS if PAN is not quoted, etc.
Conclusion
Form 121 is an important reform introduced under the Income-tax Act, 2025 aimed at simplifying TDS compliance by replacing Forms 15G and 15H with a unified declaration form. It provides significant relief to eligible taxpayers by avoiding unnecessary deduction of tax at source and improving liquidity. Taxpayers whose income is below the taxable limit should ensure timely submission of Form 121 to banks, EPFO, post offices, and other deductors to avoid avoidable TDS deductions and subsequent refund procedures.
Venugopal Bhandary is a Senior Audit Officer in C&AG of India (Retd) and a senior tax consultant at Venu’s Income Tax Services, Andheri east, Mumbai. He is a regular faculty at Regional Training Institutes of Indian Audit and Accounts Department and Income Tax Department. He has more than 35 years experience in audit of Income Tax. He can be contacted at [email protected]