What is TDS on Fixed Deposits

1
What is TDS on Fixed Deposits? How is it
Calculated?
2
What is TDS on Fixed Deposits? How is it
Calculated?

• For most Indians, fixed deposits have been the
  most popular tools for savings. The risk-free and
  assured-return mode of parking your surplus money
  has been the preferred option across generations
  for a long time. However, many investors feel
  that while FDs ensure capital protection, they
  are not the perfect tax-saving instrument. If you
  are keen on investing in FDs, there are multiple
  ways in which you can save on taxes. Read on to
  understand the tax liability on fixed deposits
  and also take away a few tips to make the most of
  FD tax exemption.Read more at https//taxguru.i
  n/finance/tds-fixed-deposits-calculated.htmlCopyr
  ight Taxguru.in

3
Fixed Deposits and Income Tax

• Fixed Deposits and Income Tax
• The interest that you earn from a fixed deposit
  is considered an income that falls under the
  category of income from other sources, and is
  thus, taxable. It gets added to your annual
  income and would be taxed as per the income slab
  that you fall in. When your bank credits interest
  to your account, if the total interest on FDs is
  over ?40,000, then TDS is applicable. In case you
  are a senior citizen, then this limit can go up
  to ?50,000.Read more at https//taxguru.in/fina
  nce/tds-fixed-deposits-calculated.htmlCopyright
  Taxguru.in

4
Tax Deducted at Source

• Tax Deducted at Source
• For any payment made to an individual, a certain
  amount of tax is deducted and paid to the Central
  Government, before making the payment. This
  payment is known as Tax Deducted at Source or
  TDS. Then while adding the gross amount to your
  income, you can report this when filing your ITR,
  and in case of zero tax liability, you would be
  able to claim a TDS refund.Let us see this
  example, you earn an interest of ?1,000 on your
  fixed deposit. The bank is supposed to deduct 10
  of this as TDS and deposit this amount with the
  government. Then, when it is time for you to file
  your annual ITR, you need to report the total
  interest of ?1,000 that you have earned. If you
  are eligible for the rebate you would be granted
  an FD tax exemption. 

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Paying Tax on the Fixed Deposit

• Interest In case there is tax applicable on the
  interest that you have earned on your FD, you
  need to pay it before the financial year ends,
  which is the 31st of March. If the payable tax
  after including the interest income in your total
  income is ?10,000 or more, then you need to pay
  advance tax.
• Calculating Tax on the Interest Income
• To calculate the tax on your income interest, you
  need to add it to the total income and file it in
  your Income Tax Return. This has to be reported
  as Income Under Other Sources. The IT
  department will make the required adjustments in
  the TDS, which has already been deducted. In case
  the bank/ financial institution where you have
  the FD, did not deduct the TDS, you need to add
  it to your total income and pay the required
  tax.

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Calculating Tax on the Interest Income

• It is also advisable that you do not wait for the
  FD to mature and then report the interest that
  you have earned. An accumulated amount of
  interest may raise your income to a higher slab,
  thus you may end up paying more tax.  The
  following points will help you better understand
  Tax Deduction as well as FD tax exemption 1.
  The bank will not deduct a TDS if
• The interest amount from all the FDs you possess
  is less than ?40,000. In case you are above the
  age of 60 years, the limit will be raised to
  ?50,000.

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Calculating Tax on the Interest Income

• 2. The bank will deduct 10 TDS if
• The interest income is more than ?40,000 or
  ?50,000 in case you are a senior citizen.
• 3. The bank will deduct 20 TDS if Your PAN
  information is not available with the bank.
• 4. If you have an annual income of ?2.5 Lakhs or
  less, then there would be no TDS. Here, your bank
  would not deduct TDS, even if the interest income
  is more than ?40,000. Make sure that you submit
  15G or 15H so that you can claim the interest
  income with the TDS. 

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Ensure TDS Deduction

• Ensure TDS Deduction
• When your annual income is not subject to tax,
  you can submit Form 15G and Form 15H to your
  bank/ financial institution before the due date.
  If you submit these forms in the beginning of the
  financial year, you can save yourself from the
  trouble of first the TDS deduction and then
  requesting the subsequent refund in your Income
  Tax Return. This is the only way to ensure that
  the bank does not deduct the TDS.

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Tax-Saving Fixed Deposit

• Tax-Saving Fixed Deposit
• Another way to get FD tax exemption is through
  tax-saving FDs. Quite similar to a regular FD, in
  a tax saving FD, you can avail of tax benefits up
  to ?1.5 Lakhs, as per Section 80C of the Income
  Tax Act, 1961. Unlike other investments such as
  ULIPs or mutual funds, FDs are not linked to the
  market and offer a fixed return. A lock-in period
  of 5 years makes tax-saving FD compound interest
  over time, thus making your money grow.Read
  more at https//taxguru.in/finance/tds-fixed-depo
  sits-calculated.htmlCopyright Taxguru.in

10
Things to keep in mind when investing in a
Tax-Saving FD

• Things to keep in mind when investing in a
  Tax-Saving FD
• If you wish to make a low-risk investment for a
  short term of 5 years, that offers you assured
  return and tax benefits, you may want to consider
  tax-saving fixed deposits, however, you must keep
  the following points in mind These FDs come with
  a minimum lock-in period of 5 years A premature
  withdrawal or loan facility is not allowed The
  interest that you earn on the FD is taxable The
  rate of interest varies from 5.5 to 7.75 The
  minimum deposit can start from ?1,000 and the
  maximum is ?1.5 Lakhs Only HUFs and individuals
  over the age of 18 years can invest in this
  scheme The rate of interest offered by different
  banks/ financial institutions would be different
  The FD can be a single as well as a joint
  account. In the case of a joint FD account, only
  one of the two account holders would be allowed
  to get tax benefits Nomination option is
  available In the case of a Post OfficeFD, a
  transfer from one PO to another is allowed The
  taxable interest is subject to and would vary as
  per the income slab you fall into Senior citizens
  may get a higher rate of interest on their tax
  saving FD.

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Other Tax Saving Options

• Other Tax Saving Options
• In the market today, there are a number of tax
  saving options available. The table given below
  will help you draw a comparison and help you in
  making a well-informed decision.
• Product Estimated Returns
  Lock-In Taxability
• 5-Year Bank Fixed Deposit 5 to 7 5
  years Yes
• National Pension System 8 to 10
  Till your Retirement Partial
• National Savings Certificate 6 to 8
  5 years Yes
• ELSS Funds 12 to 15
  3 years Partial
• Public Provident Fund 7 to 8
  15 years No
• Read more at https//taxguru.in/finance/tds-fixed
  -deposits-calculated.htmlCopyright Taxguru.in