If your only source of income is interests on bank fixed deposits, impact on the Tax Deducted at Source (TDS) will be more if you are not managed the TDS efficiently. TDS is the tax deducted at the time of paying the income to you. It is applicable to the salaried employees, bank fixed deposits, rental income, etc. In the above list, TDS on the bank deposits are the one where you can manage efficiently to minimize your loss on the income. In our blog we have published list of articles about the TDS and how to manage it. So, this blog post will be a remainder of the previous posts with few new points about the TDS.
TDS on Bank Deposits
If you have fixed deposits on your bank account, the interest income coming out of your deposits are taxable under the head other incomes. When you are submitting the income tax returns, it is your responsibility to add all the interest income and pay the tax. Note that, interest earned on your savings bank account is taxable.
How much tax is deducted on the interest income?. If your interest income on a specific branch exceeds Rs. 10000 for a financial year, 10% of the amount will be deducted as the TDS. This deduction will be levied while making the interest payments. If you are not submitted the PAN card with your fixed deposit account. 20% of the amount will be deducted as the TDS.
For the tax calculation, total fixed deposit on the same branch will be taken into the consideration. If you deposit your savings in the different branches of the same bank, each branch will be calculating separately for the TDS deduction. It is one of the way to avoid TDS.
Learn about form 15G and form 15H
If your total income is below the tax slabs, then you need not pay any tax to the govt. What if your bank is deducting the tax on interest accrued on your fixed deposit. The reason is bankers don’t have the details about your taxable income, so they simply deduct the tax if you are not providing any extra documents for their consideration.
If you are senior citizen and your total income is under the tax slabs, submit form 15H to avoid any tax deduction. Others can submit the form 15G to avoid the TDS. Form 15G and 15H has to be submitted start of the every financial year. Note that, this must be submitted for the every financial year. If you forgot to submit the documents, TDS will be deducted.
In some occasions, tax is deducted even after you submitted the forms. It is because the bankers are not processed your documents. Then you have to claim for the refund process. Instead of that, depositing in the different branches makes sense when you are not under the tax slabs.