If you have invested in a fixed deposit (FD) in India, it is essential to understand the taxation norms related to it. One such concept is the TDS (Tax Deducted at Source) levied on fixed deposit interest. Under specific circumstances, banks deduct a certain percentage of the deposit as TDS. However, there are processes through which you can claim this TDS back if your total income falls below the taxable limit. That said, all these guidelines and norms can seem perplexing to average investors. Here, we are breaking down the process of claiming TDS deducted on a fixed deposit’s interest to make it relatively easier.
TDS on Fixed Deposit Interest – An Introduction:
As per Indian taxation laws, if the interest income from your fixed deposit in a financial year exceeds Rs 40,000 (for senior citizens, the limit is Rs 50,000), the bank will deduct TDS at a rate of 10%. If the investor has not provided their PAN details to the bank, the TDS rate becomes 20%. The TDS on fixed deposit interest is deducted quarterly on the basis of estimated interest income for the year.
The Case of 50 Lakh Fixed Deposit:
Let’s take a closer look with a hypothetical 50 lakh fixed deposit, assuming an interest rate of 7%. The annual interest amount becomes Rs. 3.5 lakhs, surpassing the Rs 40,000 limit, leading to TDS deduction.
How to Claim TDS:
If your total annual income, including interest from fixed deposit, does not fall within the taxable bracket, you can claim a refund on the deducted TDS in your Income Tax Return.
Firstly, to avoid TDS deduction, you can submit Form 15G or 15H to your bank if your income doesn’t fall within the taxable bracket. Form 15H is for senior citizens, while Form 15G is for others. However, if TDS has already been deducted, following steps will guide you to claim it:
- Check Form 26AS: This form is linked to your PAN and provides details of TDS deducted. You can access it through the IT department’s e-filing website. Make sure that TDS deducted by your bank matches with what is reflected in this form.
- Filing ITR: While filing your Income Tax Return (ITR), include your TDS details in the appropriate section. Add your interest income under the head ‘Income from Other Sources.’
- Compute Tax Due: Subsequent to filing all details, the software will compute your tax liability. If your total tax liability is less than the TDS deducted, the balance is your refund amount.
- Track your Refund: After submitting your ITR, keep tracking the status through the ‘My Account’ section till you receive your refund.
While this guide simplifies the process of claiming TDS deducted on a fixed deposit’s interest, each investor’s situation is unique. Investors need to understand the market dynamics, and gauge all the pros and cons before trading in the Indian Financial Market. Take advice from a competent financial consultant to make informed decisions about your fixed deposits and TDS claims.
Summary
Understanding TDS (Tax Deducted at Source) levied on a fixed deposit’s interest is vital for an FD investor in India. Generally, if your interest income exceeds Rs 40,000 in a financial year, the bank deducts TDS at 10%, or if PAN details aren’t provided, then the TDS rate is 20%. However, if your total income falls below the taxable limit, you can claim this TDS back in your Income Tax Return. This article walks-through the process of claiming TDS deducted on a fixed deposit’s interest, focusing on cases like a 50 lakh fixed deposit and relevant form submissions. The investors though, must understand market dynamics, evaluate all pros and cons before making financial decisions in the Indian Financial Market. Simply put, this article should only be taken as information, not financial advice.
Disclaimer
This article is intended for informational purposes only and should not be taken as professional financial advice. Please consult with a financial advisor for specific guidance.
