Form 121: Aggregate of small incomes shouldn't breach exemption limit

The government has overhauled the tax deducted at source (TDS) declaration framework by introducing Form 121, which replaces the widely used Forms 15G and 15H. These forms allowed eligible individuals, particularly small depositors and senior citizens, to avoid TDS on interest income when their taxable income fell below the prescribed threshold. The shift aims to simplify compliance through a unified format, strengthen digital tracking, reduce duplication across institutions, and tighten oversight to curb misuse.

What has changed?

The Income-tax Rules, 2026, mark a major clean-up of the compliance framework. The government has reduced the number of rules from 511 to 333 and the number of forms from 399 to 190 by removing redundancies and consolidating provisions.

“As part of this rationalisation, forms have been consolidated—for example, Forms 15G and 15H have been merged into a single Form 121 for TDS self-declaration,” says Neeraj Agarwala, Nangia & Co.

Role of forms 15G and 15H

Under Section 197A of the erstwhile Income-tax Act, 1961, a taxpayer whose total income was expected to remain below the basic exemption limit could submit a self-declaration to the payer, such as a bank or company, stating that the estimated tax liability for the year would be nil. 

“Based on this declaration, the payer would not deduct TDS on specified incomes, such as bank interest, insurance proceeds, or rent. This benefit was accessed through two prescribed forms: Form 15G for eligible taxpayers other than senior citizens and Form 15H for senior citizens,” says Agarwala.

What is Form 121?

Form 121 replaces Forms 15G and 15H with a single self-declaration for taxpayers with income below the basic exemption limit who want to avoid TDS. “It reflects the government’s shift towards a digitised, unique identification number (UIN)-based system that reduces duplicate filings, improves audit trails, and limits the possibility of misuse of self-declarations,” says Agarwala.

The eligibility criteria remain unchanged. Taxpayers may submit the form either online or in paper form.

Form 121: Key improvements

Earlier, taxpayers below 60 used Form 15G, while senior citizens used Form 15H to request non-deduction of TDS on interest income. Form 121 now replaces both forms with a single declaration. 

“It mandates verification by the recipient (authorised person) under their permanent account number (PAN) to ensure more structured and reliable data, and simplifies compliance by using clearer language and removing the need to mention investment identification numbers and specific Income-tax Act sections,” says Sudhakar Sethuraman, partner, Deloitte India.

Senior citizens to be impacted most

The transition is likely to affect senior citizens, small depositors with multiple bank accounts, and taxpayers who are not comfortable with technology the most. “Senior citizens, in particular, may initially find the unified format unfamiliar. To address this, the form includes a specific section for taxpayers to indicate their senior citizen status, ensuring the process remains straightforward,” says Agarwala.

Multiple interest sources

Form 121 does not fundamentally change the process for such individuals. They must still submit separate declarations to each institution. “However, like Forms 15G and 15H, it adds a compliance layer by requiring disclosure of the total number of declarations filed during the year and the aggregate estimated income covered, enabling better tracking and consistency across submissions,” says Sethuraman.

How to file Form 121 correctly

This form covers total income, not just income from one account. Many taxpayers make mistakes when they look at one deposit in isolation and ignore their other earnings. “Before signing, therefore, estimate all income—interest across banks, dividends, rent, pension, capital gains. It doesn’t need to be perfect, but it must be honest. If you’re unsure your tax liability will be nil, don’t file the form—let TDS be deducted and claim a refund later,” says Shubham Jain, director, SVAS Business Advisors.

Mistakes to avoid

The biggest mistake is fragmentation. A taxpayer may file Form 121 with multiple banks, and each declaration may appear valid on its own, while the combined income crosses the threshold. Responsibility for this rests with the taxpayer. “Second, people ignore small income streams—dividends, savings interest, occasional capital gains—which can add up more than expected,” says Jain.

Many taxpayers also treat this as a routine exercise and do not reassess changes in their financial situation. Stronger cross-referencing now makes mismatches between declarations and final returns far more visible.

If you erred  

If you have filed the declaration incorrectly, inform the payer and ask them to deduct TDS going forward. If you did not file it in time, the payer would have deducted TDS, and you can claim a refund while filing your return. The real problem arises when your estimate turns out to be wrong or when you were not actually eligible to file the declaration. “In such cases, disclose the correct income in your return and pay the due tax and interest. Genuine estimation errors, especially when corrected voluntarily, are usually not viewed harshly—but declarations without any reasonable basis can invite scrutiny,” says Jain.

Preserve documents

After filing Form 121, keep a copy of the form, the acknowledgement, and a brief note explaining how you arrived at a nil tax liability. You should be able to explain your reasoning if the department asks later. 

Precautions while using Form 121 

•    Consider all incomes together for deciding eligibility, not each form in isolation

•    Submit separate forms to each institution—one filing is not enough

•    Keep a record of all Form 121 submissions

•    Provide details of the last two ITRs (acknowledgement number and income) 

Source: Deloitte India

 

The writer is a Delhi-based independent journalist