Fixed Deposit alert! Earned interest on FD? Bank may deduct your money- Check how you can avoid it
Fixed Deposit: Have you invested in Fixed Deposit? You should know that the interest earned from Fixed Deposit (FD) investment is fully taxable if it crosses a specified limit.
Fixed Deposit: Have you invested in Fixed Deposit? You should know that the interest earned from Fixed Deposit (FD) investment is fully taxable if it crosses a specified limit. Hence, while calculating the income tax liability, you should add the interest earned from the Fixed Deposit to your total taxable income. In the Income Tax Return (ITR), you can see it under the "Income from Other Sources" section. The tax on the interest earned on Fixed Deposit is Deducted at Source (TDS) by the bank when they credit the interest to your account. The banks don't do this when the account matures. Rather, it is done annually. In other words, if you have a 2-year fixed deposit, the bank will deduct TDS at the end of each year.
TDS deduction limit
The bank will not deduct any TDS if your interest income from the FD account is less than Rs 40,000 in a year. Before Budget 2019, this limit was Rs 10,000. The bank will deduct 10% TDS if the interest income is over Rs 40,000. In case, you have not shared PAN information with the bank, it will deduct 20% TDS.
How to stop banks from deducting TDS
You can ensure that the bank doesn't deduct TDS by submitting Form 15G and Form 15H to the lender at the beginning of each financial year. This will save you from the whole hassle of TDS deduction by the bank and subsequent refund from the Income Tax department.
Benefit for Senior citizens
Under Section 80 TTB, senior citizens, whose interest income on FD is up to Rs 50,000, enjoy income tax deductions.
Fixed Deposit is also often referred to as Time Deposit or Term Deposit. The money invested in FD account earns a certain interest rate till maturity.
You can open an FD account with all banks as well as post offices. FD tenure ranges from 7 days to 10 years in different banks. Also, the interest rates offered on FD investment varies from bank to bank. The lenders regularly revised the FD interest rates.