To pay the proper amount of tax within the particular time is everyone’s duty. The total payable tax amount is calculated based on our total income. The rate of interest on fixed deposit amount is also tax payable. At times, due to a lack of knowledge, we face many confusions about the deduction made by the bank on our bank fd rates. So, it is essential to know the details of fixed deposit returns and taxation to stay crystal clear with your money in the bank.   

TDS about Fixed Deposits:

To clear the confusion, you are having with the deduction that the bank made on the interest of your fixed deposit, it is essential to know the relation of FDs with TDS. 

When does the bank deduct the TDS?

Suppose you have multiple FDs in one particular bank. If the total interest amount of those FDs is exceeding INR 40,000, the bank will deduct a TDS. If the amount of total interest is less than INR 40,000, there will be no deduction of TDS before Budget 2019; the TDS limit was 10,000 on interest income. 

When does the bank deduct TDS at a 10% rate:

If your total income interest from all FDs from a particular bank is more than INR 40,000, the bank will deduct TDS at a rate of 10% per year.

When does the bank deduct TDS at a 20% rate:

It is essential to provide the Permanent Account Number or PAN details to your bank. If the bank does not have your PAN details, the bank will deduct TDS at a 20% rate on your FD interest. So make sure to submit PAN details while opening an FD. 

When will there be no deduction of TDS?

If your total annual income is less than the minimum taxable amount, there will be no deduction of TDS. Suppose one is earning more than 40,000 interest from FDs, but his or her total annual income, including interest income, is less than the minimum limit that is 2.5 lakh for FY 2019-20, then the bank will not deduct any TDS. The bank can not deduct any TDS if the individual is not a taxpayer. 

How can zero TDS deduction be ensured?

There is only one way to get rid of this TDS deduction from the bank. If the FD holder submits Form 15G along with Form 15H, there will be no deduction of TDS. So, to avoid the inconvenience of additional deduction of TDS and afterward refund from the Income Tax department, it is better to submit both the forms at the starting of each financial year. 

TDS deduction for senior citizens:

If the FD holder is a senior citizen (i.e., his or her age is more than 60 years) and the total interest income from FD, recurring deposit, and savings account does not exceed INR 50,000 yearly. There will be no deduction of TDS according to Finance Act 2018. 

As now you have gained a piece of detailed knowledge about the TDS deduction on fixed deposit. So, it would help if you no ran every time to the bank for any unknown deduction. For any further assistance, you can also take advice from any financial expert. 

Some Points to Keep in Mind in case of Taxation:

  • Break the misconception; there is no way bluffing form the bank. Each and everything is being recorded. Giving the name of your spouse or minor child cannot save yours from taxes. At the end of the day, the interest income will be added to the primary income. You will be shown on the tax slab. 
  • Even if you are required to pay your taxes, you should still report the same and apply for a tax return. 
  • Many times people try to hide or reduce the tax. However, never ever practice unethical practices as it can create problems for you. Keep a special note I case of a cumulative fixed deposit plan, as the interest rate will be given at the end of the tenure. But, it is advised to declare the interest income every year. If proper procedure is not followed, it can show a mismatch in the 26AS statement. 

As a result, we hope that we have given you enough information and knowledge. Land a safe investment journey.