The Buyt Desk
Fixed Deposit is by far one of the favorite ways of saving in India. In an FD you invest your money to earn interest on your interest for a fixed period of time. One of the greatest advantages is that you receive a guaranteed return on your investment. FD is also liked by many because it is considered to be quite far away from the fluctuations of the stock market. However, it is very important to keep some things in mind while investing in an FD especially as far as taxes are concerned.
Never forget this information
If you have opened an FD in the name of a minor child or your wife, the return will be taxable. The interest earned from this is added to your income and you will have to pay tax. While filing the income tax return, the interest received must be mentioned without fail. It is considered your income and you will be taxed according to the tax slab applicable to the total income.
How to report interest income?
Banks deduct TDS at the end of every year while depositing interest in FD account. But even if your bank has deducted TDS on the return received from the FD, it will have to be reported in the income tax return. There is a column at the time of filing the income tax return, where information about income from FD has to be given. Interest earned from FD is mentioned in the tax credit statement of Form 26AS. If you do not show interest in your IT return, then there will be a mismatch in your return filed and 26AS which could result in an Income Tax notice.
How much tax will be levied?
Normally banks deduct 10% TDS on income from interest, but if you fall in the tax slab of 20 or 30% then you will have to pay additional tax. If for some reason the bank is not deducting TDS on the interest of FD, you should still add it to your income and pay tax. If you do not do this, when the FD matures, then you may have to pay a large amount of tax.
Form 15G/ 15H
If your taxable income is nil and you don’t want your bank to cut your TDS then you can fill self-declaration form 15G and request your bank for not to deduct TDS. Banks deduct a TDS if the interest of more than Rs 40,000 is earned from a bank deposit. This limit is Rs 50,000 for senior citizens. The senior citizen can make the request for no TDS deduction by submitting self-declaration form 15H.
