How Can Senior Citizens Avoid 10% TDS on Fixed Deposit?
From this year onwards, all senior citizens over the age of 75 can get an exemption from filing income tax if they submit form 12BBA with the banks.
All senior citizens whose income sources are pension and interest from fixed deposits, are now eligible for the exemption, however, an additional condition is that the income from the pension and interest has to be deposited in the same bank.
What is Form 12BBA?
Form 12BBA is a form with details of:
- Tax deductions that have to be claimed under section 80C to section 80U
- Tax rebate claimed under section 87A which will reduce the taxable income below Rs.5 lakh exemption
- The total income from pension and fixed deposit (FD) interest.
The Central Board of Direct Taxes (CBDT) has said that after the form has been submitted, the bank will calculate the total income of the taxpayer after taking into account the tax deductions and rebate under section 87A. The bank will also deduct tax on the derived income on the basis of slab rates.
In order to make sure that senior citizens do not have any difficulty filling the form, CBDT has also told banks to help all eligible seniors in filling the form.
When you submit Form 12BBA, the senior citizen taxpayers do not have to go through the hassle of getting refund on tax deducted at source (TDS) on interest from fixed deposits. The IT laws state that 10% TDS is deducted on interest income over Rs.50,000 earned by a senior citizen who is 60 years and over.
For taxpayers who are in the 5% and 10% tax slabs, the 10% TDS will give them a higher tax pay as compared to what the taxpayer will pay as per his/her tax slab.
If you have Rs.7 lakh interest income, you will pay Rs.70,000 tax when 10% TDS is deducted. If you submit Form 12BBA, you have to pay Rs.52,500 as tax. In the former case, you will have to get refund of Rs.17,500.
FAQs on How Can Senior Citizens Avoid TDS on Fixed Deposit
- What is the TDS rate on FDs?
TDS (Tax Deducted at Source) attracted on income from fixed deposits interest is 10% and the rate is 20%, in case the PAN details of the individuals are not provided to the bank.
- What is 80TTB for senior citizens?
Taxpaying senior citizens of 60 years age or above can claim tax deductions of Rs.50,000 for the current financial year, as mentioned under the provision of Section 80TTB of Income Tax Act 1961.
- Can I claim a deduction for the interest earned from fixed deposits?
No, you cannot claim any deduction on the interest earned from fixed deposits according to the Income Tax Act.
- When do post office or banks deduct TDS?
TDS or tax is deducted, if the interest earned from fixed deposits exceeds the threshold limit of Rs.40,000 per financial year. In the case of the senior citizens, the TDS deduction takes place if the interest earned per financial year exceeds Rs.50,000.
- How much tax is payable on FD interest?
The tax payable on FD interest depends upon the income slab rates. If you have low income, then the tax payable amount would be less. While in case you come under high income slab rates, then you need to pay higher tax in addition to the TDS imposed by the bank.
- Who is exempt from senior citizen return filing?
Senior citizens of 75 years of age or above and have income from other sources, can be exempted from filling income tax returns, provided declaration is submitted to the bank by the senior citizen customers.
- How much tax deduction can be claimed on FD interest for senior citizens?
Tax deduction that can be claimed on interest earned on fixed deposits for senior citizens is an amount of Rs.50,000 during filling income tax return.
- Can I claim a tax deduction to get FD interest without TDS if my income is below the taxable limit?
Yes, you can claim tax deductions to receive FD interest without any TDS, even if the income is below taxable limit, then you need to submit form 15G and senior citizens need to submit form 15H.
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