TDS on FD interestImage Credit source: AI
Many senior citizens invest money in fixed deposits (FD) for regular income after their retirement. But when interest is received from FD, the bank deducts Tax Deducted at Source (TDS) on that interest. TDS is not a separate tax, but a tax deducted in advance, which can be claimed while filing Income Tax Return (ITR).
However, if the total interest income received by a senior citizen from a bank FD in the entire financial year is up to Rs 1 lakh, then the bank does not deduct TDS on it, but if the interest income exceeds Rs 1 lakh, then the bank deducts TDS. Still, there are some situations in which banks do not deduct TDS even if the interest exceeds Rs 1 lakh. Or senior citizens can avoid deducting TDS in some ways, even if their interest income from FD of the same bank is more than Rs 1 lakh. Let us know what these methods are.
In an ET report, chartered accountant Jigar Suba, founder of JC Suba & Associates, says that this limit of Rs 1 lakh is applicable only on interest earned from deposits kept in banks or post offices. This includes private banks, government banks and cooperative banks. For any other type of interest income like savings account or other sources, this limit is only Rs 10,000.
When do banks deduct TDS on FD interest and when not?
Chartered accountant Abhishek Soni, CEO and co-founder of Tax2win, says that if a senior citizen gets interest up to Rs 1 lakh from a bank in a whole year, then the bank does not deduct TDS. Giving an example, he says that if the interest rate on FD is around 8%, then if you deposit around Rs 1213 lakh in a bank, you will get interest of around Rs 1 lakh in a year, and no TDS will be deducted on it, but if the investment amount is high and the interest goes above Rs 1 lakh, then the bank will deduct TDS. Unless Form 15H is submitted.
How much TDS will be deducted on different interests?
Jigar Suba explains that if a person earns interest up to Rs 1 lakh from each bank from FD of two different banks, then TDS will not be deducted from any bank. For example, if Chandrakant gets interest of Rs 90,000 from HDFC Bank and Rs 80,000 from SBI Bank, then the total interest becomes Rs 1,70,000. Despite this, TDS will not be deducted because the limit of Rs 1 lakh is not being met in either of the two banks. In this way people can plan their investments so that the interest received from each bank does not exceed Rs 1 lakh.
What is Form 15H and who can use it?
Abhishek Soni explains that Form 15H is a declaration form given to Senior Citizen Bank, so that TDS is not deducted on FD interest. He said that this form is valid only when no tax is actually payable on the total taxable income of the senior citizen. If your total income exceeds the tax exemption limit, you will have to pay tax and TDS cannot be avoided just by submitting Form 15H.
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