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.
also read:
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.
June 22, 2012 at 10:13 pm
Very true. So to minimise the TDs or taxation per se. it is always better to chose the investment instruments wisely. The instrument selection should be commensurate to your taxation and also should be according to the return expected. If the requirement is to get compounded return and you come under higher tax bracket then you may chose MF FMPs to bank Fixed deposits. Even the alternative to parking money in saving ban a/c can be Liquid/Liquid plus funds….and many such strategies can help you minimise TDS.
June 23, 2012 at 6:46 am
Hello Manikaran,
Thank you for the comments.
Thanks,
Krishna
July 4, 2012 at 3:56 am
Referring to the statement from your article: -
“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.”
I have FD in 3 different banks (not branch) (and all banks knows my PAN number). And all banks have accumulated interest well above 10,000. So they have deducted tax of 10% But when I see my form 26AS, I have all details of 3 banks. So while filing my return, I had to pay the remaining 20% tax as the income from my salary + FD interest falls in 30% tax slab. In such a case, is it true that different bank FD will reduce my tax? Even in general case, if I have account in many banks but all linked to 1 PAN number, the form 26AS will reflect the total income from all FDs. In such a case, will I still be able to minimize tax?
August 11, 2012 at 11:22 am
That’s a good a good point Mr. Debraj. As your savings and TDS details are traceable using the PAN tag there is no way you can escape by splitting it and investing in different bank branches. This is one of the fallouts of computerised networking of banks
July 13, 2012 at 10:57 pm
I am a senior citizen. Out of my arrear payment, I have fixed Rs9,30,000 @10% interest i.e Rs9300 earn as an annual interest.
Is there be any deduction as TDS? If so, please advice what to do?
September 19, 2012 at 1:55 pm
Pradip ji,
interest amount should be 93,000 instead of 9300.
it will be taxed as per yor total income falling in senior citizen’s tax slab.
regards
bhavin saraiya
July 20, 2012 at 2:19 pm
If I generated an income of 18000 from a FD of 2 lkh for 9% interest 1year.
And I choose to continue the FD for the next year as well.
Would I have to show in ITR the income from interest (on Rs. 18000) for this year?
Since I have yet not withdrawn any of the interest income