Tax On Fixed Deposit Interest

When Do You Have to Pay Tax on Your FDs?

The earnings on your FDs are calculated as a part of your gross annual income. From April of 2019, if you are earning an interest of more than 40000 INR on your FD, you are liable to pay 10% tax on it (if you are a PAN user).

Let’s learn about this in detail.

What is TDS on Fixed Deposit?

TDS stands for Tax Deducted at Source. In the case of fixed deposits (FDs), TDS refers to the tax that the bank deducts from the interest earned on your deposit before crediting it to your account.

Here's a breakdown of how TDS on FDs works in India:

• Exemption Limits:
• There's no TDS deducted if your total FD interest income in a financial year is below Rs. 40,000 for regular individuals and Rs. 50,000 for senior citizens (60 years or above).
• If your total income (including FD interest) falls below the basic exemption limit, you can claim further exemption by submitting Form 15G or 15H to the bank.

• TDS Rate:
• If your FD interest income exceeds the exemption limit, the bank deducts 10% TDS on the interest amount.
• Not providing your PAN card to the bank can result in a higher TDS deduction of 20%.

TDS on Non-Bank FDs (NBFC)

TDS rules for Non-Bank FDs (NBFC FDs) are different from regular bank FDs. Here's what you need to know:

• Lower Exemption Limit: The threshold for TDS applicability on NBFC FDs is lower compared to banks. It's Rs. 5,000 - any interest income exceeding this amount becomes taxable.
• Standard TDS Rate: Similar to banks, the TDS rate on NBFC FDs is 10% if your interest income surpasses the Rs. 5,000 limit.
• Penalty for No PAN: Just like banks, NBFCs deduct a higher TDS (20%) if you don't provide your PAN details.

Remember:

• Even if TDS is deducted, you might still need to pay additional tax during income tax filing if your total income falls under a higher tax slab than the 10% TDS rate.
• You can claim a tax refund for any excess TDS deducted by filing your income tax return.

TDS on FD for Senior Citizens

Senior citizens (aged 60 years or above) get a benefit when it comes to TDS on FD interest. The exemption limit is Rs. 50,000. This means if your total FD interest income in a financial year is below Rs. 50,000, the bank won't deduct any TDS.

If your FD interest income exceeds Rs. 50,000, the bank will deduct a flat 10% TDS on the interest amount that surpasses the limit.

Providing your PAN card to the bank ensures the correct TDS rate is applied. If you don't submit your PAN, the bank is obligated to deduct a higher TDS of 20% on the entire interest income.

Tax Benefits and Refunds:

• Senior citizens can get a tax deduction of up to Rs. 50,000 on their interest income from all sources (including FDs) under Section 80TTB of the Income Tax Act.
• Even with TDS deducted, if your total tax liability is lower than 10%, you can claim a refund for the excess TDS amount while filing your income tax return.

How to Get a TDS Waiver on an FD?

To avail of a TDS waiver on your Fixed Deposit (FD) interest income, you can submit a declaration form to your bank. Here's what you need to do:

Forms for TDS Waiver:

There are two forms used for claiming a TDS waiver on FD interest, depending on your age:

• Form 15G: If you are below 60 years old, you need to submit Form 15G.
• Form 15H: This form is applicable for senior citizens above 60 years of age.

What the Forms Do:

Eligibility for Waiver:

• You can only claim a TDS waiver if your total income (including FD interest) is below the basic exemption limit for the financial year.
• The current exemption limit is Rs. 2.5 lakh for individuals below 60 years old and Rs. 3 lakh for senior citizens between 60 and 80 years old. It's Rs. 5 lakh for senior citizens above 80 years old.

Submitting the Forms:

• You can usually download these forms from your bank's website or collect them from a branch.
• Fill out the form completely and accurately, including your PAN details.
• Submit the completed form to your bank. It's recommended to do this at the beginning of the financial year (April 1st) to ensure the waiver applies throughout the year.

Frequently Asked Questions: