Fixed Deposit: Fixed Deposit (FD) is a safe investment option. A fixed return is received on FD. However, the interest on FD is completely taxable and is included in your annual income. If a financial year gets an interest of Rs 40,000 from FD and more than Rs 50,000 to senior citizens, then TDS (TDS – Tax Deduted At Source) is deducted on it.
Tax rates on FD
Based on your taxable income, the interest on FD is levied. For example, if you come in 20% tax slab, you will have to pay 20% income tax on FD interest. These rules apply to both bank and non-banking financial companies (NBFC).
TDS on Bank FD
For people under 60 years of age, 10% TDS is deducted at more than Rs 40,000 interest.
Senior citizens i.e. 10% TDS are deducted at interest of more than Rs 50,000 for 60 years and above.
If the PAN card is not given to the bank or NBFC, 20% TDS is deducted.
TDS on NBFC FD
10% TDS is deducted at more than Rs 5,000 for FDs in non-banking financial companies (NBFC). If PAN card information is not given then 20% TDS is applied.
Tax rules for NRI
More TDS is applied to NRI than Indian citizens. NRI may have to pay 10% to 30% TDS.
How to get exemption from TDS on FD?
If your total taxable income tax does not come under the scope of the tax slab, you can apply for TDS exemption by filling Form 15G (general taxpayer) or Form 15H (for senior citizens).
TDS is also applicable to recurring deposits (RD)
Like the fixed deposit, TDS is also applied to the recurring deposit (RD), but it is cut not annually, but annually.
How to calculate tax on FD interest?
Take interest information – Learn the total interest received from your FD.
See tax slab– Decide the tax rate according to your total income.
Calculation of payment – Add the fixed tax amount.
Add to ITR – Income tax returns (ITR) include it.
See Form 26AS – To decide whether the correct tax is deducted or not.
FD is a safe and famous investment option, but tax is applied to interest income from it. To avoid TDS, Form 15G/15h can be filled and it is necessary to pay the correct tax according to the tax slab. If your more income tax comes in the bracket, then there is a possibility of making additional tax payment. This can be corrected while filing income tax returns.
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