Taxpayers who earn certain types of income such as bank interest, rent, insurance commission, dividends, or income from securities may have tax deducted at source (TDS) on those payments.
However, if their estimated tax liability for the year is nil, they can submit Form No. 121 to avoid TDS on specified incomes. The new form replaces the earlier Forms 15G and 15H and brings both declarations into a single format under the Income-tax Act, 2025.
What is Form No. 121?
Form No. 121 is a declaration through which an eligible taxpayer tells the payer that their estimated total income for the relevant tax year will not result in any tax liability.
The payee/deductee is the person receiving the income and submitting Form 121. The person or entity making the payment is the payer or deductor.
The purpose is to prevent TDS from being deducted when the taxpayer ultimately has no tax to pay, reducing the need to claim a refund later.
Who needs to submit Form 121?
For individuals below 60 years and other eligible taxpayers such as HUFs and trusts, two conditions apply:
- Tax payable on estimated total income for the Tax Year must be nil.
- The specified income on which TDS would otherwise apply must not exceed the maximum amount that is not chargeable to tax.
For senior citizens aged 60 years or above, the key condition is that the tax payable on their estimated total income must be nil.
What documents are needed for Form 121?
The taxpayer needs to provide certain basic information while furnishing the declaration. These include:
- The taxpayer’s valid and operative PAN
- Details of the taxpayer’s relevant income and investments.
- Proof of age, where the taxpayer is claiming eligibility as a senior citizen.
- The payer’s TAN – the person or entity making the payment and responsible for TDS deduction.
Which incomes can be covered?
The declaration can apply to specified payments, including:
- Interest from banks, cooperative banks and post offices
- Interest on securities
- Rent
- Insurance commission
- Dividends
- Income from mutual fund units
- Certain life insurance policy payments, including bonuses
- Payments of accumulated balances from recognised provident funds
When should Form 121 be submitted?
The form should ideally be furnished before the income is credited or paid. Submitting it early in the Tax Year can help ensure that TDS is not deducted in the first place.
It can be submitted electronically through the portal provided by the payer or in physical form, as applicable.
What does the payer have to do?
The payer, or the person making the payment, must verify the declaration and assign a Unique Identification Number (UIN) to it. The payer must also report the declaration through the income tax e-filing portal.
The declaration is required to be submitted separately to each payer. A taxpayer cannot submit one Form 121 and expect it to automatically cover all payers.
Disclaimer: This is only for informational and educational purposes. Please consult a qualified expert for the latest laws and regulations.
