Updated on : Oct 04, - PM. It also ensures capital protection along with some interest returns. However, the interest income earned on the fixed deposit is taxable. Seldom do investors think about paying tax on the interest income on time.
This article will cover when and how to pay income tax on FD interest income. Interest income from Fixed Deposits is fully taxable. Add it to your total income and get taxed at slab rates applicable to your total income. Banks deduct tax at source at the the time of crediting interest to your account if the amount of interest is beyond Rs. Hence it should be remembered that the TDS is deducted at the time of credit of interest and not when the FD matures.
Understanding TDS :. When you receive certain payments the person paying you has to deduct tax before making the payment. You will receive the credit of amount net of tax. You then have to add the gross amount to your income while reporting in your Income Tax return.
As against this, the credit of TDS is also provided from the total tax liability or TDS refund is offered in case of nil tax liability. For an example, if you earn FD interest of Rs. While reporting the interest income in ITR, you have to report entire interest earned of Rs. Add the interest income to your total income in your Income Tax Return each year even though, it may not be paid out. See which tax slab rate you fall into. If the bank does not deduct TDS from your interest income, the total interest income earned from your fixed deposits in a particular financial year is to be added to your total income and pay tax on it.
It is not advisable to wait until the maturity of your FD when interest is actually received— to report the interest income. The bank FD interest income is fully taxable in the hands of the investor and banks levy TDS which may be adjusted while filing the income tax return.
The interest income from bank fixed deposits is subject to TDS at 10 per cent but can be deducted at 20 per cent if PAN is not furnished. So, if you are in the highest tax bracket of 30 per cent, merely paying TDS of 10 per cent will not be enough. And, those who do not income above the exempted limit may intimate the bank, not to deduct TDS. Form 15H is for an individual who is of the age of sixty years or more senior citizens while Form 15G is for all others for whom the total income will not exceed the maximum amount which is not chargeable to income-tax.
If you had already submitted such forms, related to fixed deposits, in the previous year, you will be required to do it again this year. Such Forms may be submitted only by those whose income is below the exemption limit as per the Income Tax Act. For those who are less than 60 years, income up to Rs 2. And, for those above 80 years, there is no tax liability up to Rs 5 lakh. Like us on Facebook and follow us on Twitter.
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