Ground Report

A lot of Indians see bank deposits as a good investment option. Fixed deposits (FDs) are the type of financial services which are considered as old and safe to save some funds by many. Fixed deposits are a risk-free way to save some money in case of emergencies. As the name suggests, a preset amount of money has kept the banks or financial institutions for a fixed term.

You earn interest on fixed deposit from the bank on the funds. The interest rate offered differs for different financial institutions as well as on the tenure of the fixed deposit. There are a lot of people who are unaware of the tax rules on FD, especially when it is related to the taxability of the interest income.

Here are Five Rules that you Should Know About:

• If you earn more than INR 10,000 of interest on your fixed deposits in the current financial year then TDS (tax deducted at source) will be removed at the rate of 10%. If you have failed to give your PAN (Permanent Account Number) details, a tax deduction of 20% will be done. Recurring deposits are also included in this rule.
• Once you consolidate all your deposits at different branches of a bank, a TDS will be applied. Before this rule, it was only applicable to a single branch. If the collective interest on recurring or fixed deposits happening at multiple branches of the bank is above INR 10,000 in a financial year, deduction of TDS will happen.

• Declaration of TDS must be done in the Income Tax Returns, even if the bank has done it. The amount of tax you have to pay on your interest income is decided according to our tax slab. The deduction of TDS is done by the bank at the rate of 10%. If you come in the higher tax bracket, you must pay the extra tax while filing your returns.
• If you submit form 15G or 15H, then TDS deduction from your interest income will be saved. But this will happen only if your taxable income is a lesser amount as compared to the total exempted income (INR 2.5 lakhs) within a year and you have to tax liability. If you do not submit these forms then you will have to file a tax return to get reimbursement.
• There will be no deduction of TDS if you have a savings account interest income. In case your interest income for the financial year is more than the non-liable limit of INR 10,000 then you need to pay tax on the excess amount and you will have to include it in your tax returns.

FD is viewed as a very safe investment option. But there are a few rules that people do not know of when it comes to fixed deposits.