How to save tax? What you must do and get from a 5 Year Tax Saving Fixed Deposit
As we all know that individuals earning more than Rs 2.5 lakh are required to file income tax return each year. Financial year commences from 1st April and ends on 31st March, therefore, the financial year 2018 – 19 would end on 31st March 2019. Your income would be assessed for the period from 1st April 2018 to 31st March 2019. With income tax return filing season looming, here is a big option that you can explore to save your hard earned money and earn a good interest on it instead of paying it to the taxman. However, you should know that beyond a certain limit, you will have to pay TDS. The option is 5 Year Tax Saving Fixed Deposit.
For opening Senior citizen 5 Year Tax Saving Fixed Deposit account, customers need to provide proof of age establishing that he/she is a Senior Citizen. They should visit the nearest bank branch and fill the fixed deposit booking account opening form to open a 5 Year Tax Saving Fixed Deposit. They can also open a joint account with a non-senior citizen for 5 Year Tax Saving Fixed Deposit. Image source: PTI
SBI and HDFC Bank 5 Year Tax Saving Fixed Deposit Scheme Interest Rates for investments are 6.85% p.a and 6.50% respectively, and for senior citizens interest rates are 7.35% and 7% respectively. Image source: Reuters
As a 5 Year Tax Saving Fixed Deposit holder, you can apply for an exemption on TDS if your total interest income for the year does not fall within the overall taxable limits. You can do this by submitting a form as per the provisions of the Income Tax Act. Image source: Reuters
Individuals should know that TDS on 5 Year Tax Saving Fixed Deposit is deducted every time the bank pays/re-invests interest during the Financial year. TDS is also deducted on interest accrued, but not yet paid at the end of financial year. Image source: Reuters
Individuals should also know that now they need not visit the branch to receive their 5 Year Tax Saving Fixed Deposit proceeds on maturity, as it will be credited to their account on maturity as per instructions. Image source: Reuters
Any change or enhancement in your deposit portfolio earns a cumulative interest along with that of the earlier portfolio, more than Rs 10,000. In such a situation, you will be liable for TDS on their current portfolio. If interest on the current portfolio is not sufficient to cover TDS, it will be recovered from the principal. Image source: Reuters
About Tax Deduction at Source(TDS), common question is asked when are they liable for TDS. You only become liable for TDS if aggregate interest that you’re likely to earn for all your deposits is more than Rs 10,000 in a financial year. It will be deducted when interest payable or reinvested on RD and FD per customer across all branches, exceed Rs 10,000 in a financial year. Image source: Reuters