Introduction

Interest income from Fixed Deposits is fully taxable. It is added to your total income and taxed at slab rates according to your total income. It is shown under the head ‘Income from Other Sources’ in your Income Tax Return. The tax is payable after addition of your interest income to your total income and it must be pay before 31st March of the financial year.

In case there is large income from interest – Advance Tax may become payable on a quarterly basis.

TDS in relation to FDs

  • When TDS is not deducted by bank

    If your interest income from all FDs with a bank is less than Rs 10,000 in a year, the bank does not deduct any TDS under the section 80c.

  • When TDS deducts @ 10%

    – Bank deducts TDS @ 10% from your interest income when it exceeds Rs 10,000 in a year. The evaluation of interest income for the year is made by a bank from all the FDs you have with the bank and if it exceeds Rs 10,000, they will deduct TDS @ 10%.

  • When TDS deducts @ 20%

    In case you do not provide your PAN information to the bank, they will deduct TDS @20%. So do make sure Bank has your PAN details.

  • No TDS is deductible when total income is less than 2.5lakhs

    In the case of housewives or senior citizens, it may be possible that their interest income in a year is more than Rs 10,000 but their Total Income (including interest income) is less than the minimum exempt income (Rs 2,50,000 for the financial year 2016-17). Since no tax is payable by the individual no TDS should be deducted by the bank. To know that no TDS is deducted by the bank submit Form 15G or Form 15H to a bank. You have to submit these forms at the start of each financial year – this way Bank won’t deduct any TDS and you will be saved from waiting for a refund from the IT Department.

Points about the Tax Saving Fixed Deposits

If tax saving fixed deposit invested by a taxpayer in a then, he can claim the amount invested up to Rs.1.5 lakhs as a deduction from his income, as per the current tax laws. The amount which is invested is to be deducted from the gross total income in order to arrive at a taxable income. This deduction is allowed under Section 80C of the Income Tax Act. Section 80C also defines the limit of investment for which a deduction can be claimed under it. Currently, this limit is however fixed at Rs.1.5 lakh. Tax-saving fixed deposit is approved for investment to claim the tax break under Section 80C of the Income Tax Act.

  1. Only the Individuals and HUFs can invest in the tax saving fixed deposit scheme.
  2. The minimum amount Fixed Deposit can be placed which varies from bank to bank.
  3. These deposits have a lock-in period of 5 years. Premature withdrawals and loan against these FD’s are not allowed.
  4. A person can invest in Fixed Deposit through any public or even private sector bank except for the co-operative and rural banks.
  5. Post Office Time Deposit investment of 5 years also qualifies for the deduction under section 80C of the Income Tax Act, 1961.
  6. Post Office Fixed deposit can be transferred from one Post Office to another.
  7. These FD’s can be held either in ‘Single’ or ‘Joint’ mode of holding. In the case when the mode of holding is joint, then only first holder can avail the tax benefit.
  8. The interest earned on Fixed Deposit is taxable as per the investor’s tax bracket and therefore, TDS is applicable. The interest on the fixed deposits is payable on either monthly/quarterly basis or it can be reinvested.
  9. Nomination facility is also available in Fixed Deposit.
  10. Higher interest rate on Fixed Deposits is also provided to the senior citizens by most of the banks.

For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business ReturnBulk Return or Revised Return Filing.