TDS, known as Tax Deducted at Source, is the tax that is deducted from the interest earned on FDs, if they fall in the taxable category. FDs may remain to be one among the most safe and popular investment options among traditional investors and senior citizens but not many people still know about the tax aspect when it comes to term deposits. Whether a customer is investing in a fixed deposit at a bank or NBFC, TDS will be applicable in both cases. It is very important for those who have an FD and those who plan to invest in one, to know the various rules and regulations when it comes to TDS. The interest gained from such deposit accounts tend to be added to the total income and tax will be charged as per applicable rates. This income will be shown under the ‘Income from Other Sources’ section in an Income Tax Return (ITR) sheet.
Questions such as what is TDS?, how is TDS on FD calculated?, or how to avoid TDS?, are some of the most common questions that people ask when it comes to TDS on fixed deposits. Read on further, to understand more about all aspects about TDS on FDs.
Given below are the rules and regulations as far as TDS on FDs are concerned:
When is TDS applicable: TDS will be applicable only if the interest earned on an FD is more than Rs.10,000 in a given financial year, ie: from April 1 to March 31.
TDS for senior citizens: For those who are 60 years or older, TDS will only be deducted if the interest income exceeds Rs.50,000 in a given financial year. Earlier, the limit was Rs.10,000 but this limit was increased to Rs.50,000 in the Union Budget 2018.
Calculation of TDS: In most cases, banks or financial institutions will cut TDS at the rate of 10% on the interest that is earned, if it is more than Rs.10,000 in a year.
When is TDS deducted at 20%: If the depositor fails to provide PAN card information at the time of applying or opening the FD account, then the bank or NBFC, will deduct TDS at the rate of 20%, which is 10% more than the standard TDS rate.
TDS for joint account holders: In case of those who have a joint account, TDS will only be deducted against the primary account holder's PAN. Therefore, the secondary account holder will not be subject to tax treatment.
Banks will automatically deduct TDS: The depositor does not have to pay TDS. The bank concerned will deduct it automatically by the end of the year.
Fully taxable: The interest that is earned on a fixed deposit will be fully subject to tax if the income earned from the same goes beyond the set limit. Therefore, it is not the amount invested but the interest, which will be subject to taxation
TDS is applicable on tax saver FDs too: The interest that is gained from a tax saver FD will also be fully subject tax. It is a misconception that TDS will not be applicable in the case of such deposits. But this is not true. The same rules are valid even to these tax saver term deposits.
How is TDS computed for a fixed deposit
To understand more about the TDS computation procedure, it is best to take a look at an example.
Lets say Prashanth holds 2 FDs - both for Rs.1 lakh. If he earns interest at the rate of 10.00% p.a for 4 years, the interest income in 1 year will be Rs.20,000 from both the term deposits. (Rs.10,000 from each FD). In such a case, TDS will be charged at the rate of 10% on the total interest income. Therefore, 10% of Rs.20,000, which is Rs.2000.
Avoiding TDS on Fixed Deposits: Tips
Invest in the middle of the financial year: The most valuable tip that can be applied while investing in a fixed deposit is to choose the right time. If depositors make an investment in a term deposit scheme in the middle of the year, say in September, the interest earned will get divided into two financial years. In such cases, it is more likely that the interest income will not exceed Rs.10,000 and TDS can be avoided. This, however, depends on the amount that is being invested and the amount of interest that is earned.
Submit relevant forms: For those who are not earning more than Rs.10,000 on their time deposits, a declaration form can be submitted to prevent the bank from deducting TDS. These forms are 15G and 15H form for Fixed Deposit Investments to avoid TDS . Form 15G is for those who are below 60 years of age, while Form 15H is specially meant for senior citizens.
Invest across banks: Another great thing to do is to invest in a number of banks instead of putting all the money in a single FD in a single bank. This should be done in such a manner that the interest income from all these FDs, do not exceed the prescribed limit in a certain financial year.
1.What is TDS?
Tax Deducted at Source or TDS is type of tax that is collected by the Income Tax Department of the government of India. Bodies that make payments to individuals are responsible to deduct a certain percentage and then make the payment.
2. What happens if I do not pay TDS?
TDS is not something that you will have to pay as far as FDs are concerned. It will be deducted from the interest income that is earned automatically by the bank or financial institution, where you are putting your money.
3. Will I be issued a TDS certificate?
Yes. All banks will send the depositor a detailed TDS certificate that specifically outlines the amount of deduction and the rate of deductions that are made.
4. Is it possible to ask the government for a refund if tax is deducted by mistake?
Yes, this can be done by filing income tax returns.
5. Is TDS applicable for those who are above 60 years?
6. When is TDS deducted?
It is usually deducted at the end of a quarter or before paying the depositor. This system may vary from bank to bank.
7. Will a minor or a non-working spouse be subject to tax on a fixed deposit?
8. Is it mandatory to declare interest income?
If interest income is not declared then there will be a discrepancy in your tax papers because the bank/NBFC will have already reflected the TDS deductions through your PAN.
9. Why is TDS deducted by banks?
It is mandatory as per prevailing tax rules for banks to deduct TDS before making a payment to depositors.
Many a times, Fixed Deposit (FD) holders wonder why their bank has made a cut on TDS (Tax Deducted at Source), on their FDs even if it was not applicable.
Customers who have FD accounts have been regularly facing this problem. To counter this, there have been several measures that have been put into place. This includes remittance and compilation of TDS at the head office level instead of the bank level and fixing cases where TDS has been deducted wrongly for customers who have submitted the relevant documents.
TDS will be deducted on all FDs if the interest earned on the same for a financial year is more than Rs.10,000. Banks can deduct 10% on the interest earned. The rate of deduction will double, adding up to 20%, if the customer has not furnished PAN details with the bank where he/she holds an FD.
7 November 2017
IT Commissioner: Banks ‘overlooking’ TDS
Chandigarh: Deductors are ‘overlooking’ the TDS on the interest income on fixed deposits, YK Singh, Income Tax Commissioner (TDS-1) of Chandigarh said at a recent meet of the heads of the North Zone. A survey of a few bank branches revealed the practice, Singh said at the meet organised by the Department of Income Tax in association with the PHD Chamber of Commerce and Industry.
Singh said his department aims to have a healthy relationship with banks for conducting various functions including tax deduction at source on fixed deposits. Singh asked banks to deduct tax if depositors submit Form 15G (interest is above the exemption limit).
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I am doing Fixed Deposit with ICICI BANK and its been around 5years. They haven't been paying good interest and its more or less same like other banks as I used to hold my salary account with ICICI, I have decided to be with one bank. There is no locking period and its flexible. They do give good support and the app is user friendly. Even deposit account can be opened through i-mobile or net banking itself.
I had a Fixed Deposit in State Bank of India, I have completed the tenure before 3months ago. I have no issues with the customer service. They are given me 7% interest rate for 2years. There is no profit and processing fee. I got an online access, where I can check the interest rate anytime on the YONO app or else SBI online.
I have invested some money through FD. My salary account is in SBI so i have a zero ATM charges and the limit is not actually set by SBI. They do have short term FDs which is pretty good. I have invested the money of Rs. 60000 and the interest rate is 10.01% for the tenure period of 16 months. There is no lockin period. There is no hassle to getting the money back.
I have invested the money in Dena bank through Fixed deposit and the growth is not that much good. They are not taking any hidden charges. Only because of the Government undertaken bank, i have selected them. They are providing a interest rate of 6% per annum. I have invested the money of Rs. 2 lakhs. There is a lockin period of 1 year.
I have opt for fixed deposit for the tax saving purpose because I have chosen five years tenure with AXIS Bank, still its going on. Only once I Invested my money it has the locking period of five years. I have option to check my transactions through mobile app. But I have concern about the interest rate is very lesser for this FD.
I had fixed deposit with SBI then I withdrawn the amount, I done Rs. 3 lakhs of investment on my daughter name then I taken the liquidity to purchase the land, at the time I struggled a lot to take that money because the process was difficult to withdrawn the money after seven months of tenure.
I had a Fixed Deposit with Union Bank of India and its closed 18 to 19 months due to personal reasons. I am doing investment but my experience is not good with FD account. In my home town, there is no other banks so just decided to go with this bank. The returns are good.
I have one FD with HDFC, I deposited Rs. 1 lakh, I was opt for 45 days of tenure. Finally I got 6.25% of interest for 45 days. It won't cover the tax, if we need tax benefits we should go for five years term. I can track the details through netbanking, on the maturity date the amount credits automatically in the account. Even the notification can customized.
HSBC staff wrongly pre closed my fixed deposit .. and calculated the interest rates wrongly and when asked them for clarification never got back .. even after following up with them repeatedly for more than 3 months.. would highly recommend not using their services.
Was this review helpful?
A V kumar
Reviewed on Aug 24, 2019
I do have a Fixed deposit account with SBI and it was carried out by Mom and even I have account for my daughter. Its still running and they have Google application separately to access online. The returns are good. I am doing monthly investment and it was opened quite a long may be 4 years.
I just opened a Fixed Deposit with ICICI BANK and have not done any survey on this. I am account holder with them so it was easy to do FD account even they are providing 7% interest rate. The process is very user friendly and never faced any hassle. I could access this account via online.
In post office rate of interest is higher for the fixed deposit when compared to the bank, I invested Rs. 5000 on monthly basis its comes in a year Rs. 60,000 after 5 years I got Rs. 3.75,000 I got Rs. 75,000 extra. The service is not comfortable if we have any relative who working there it would supportive or else difficult.
I have FD with SBI, I have opt for one year term there is no such limitation for depositing the money. The interest rate is good for the FD, the online banking is convenient to take liquidity. They resolve the queries on time. Its most safe and secured.
I have selected state bnak of indis fixed deposit amount 1 lakhs , Tenure 5 years and Rate of interest 8 percentage after renewal fixed deposit 6 percentage is very less .while document directly bank . Customer service is not good and responsive.
I activated FD account with Kotak, I have been maintaining this account since when I opened saving account, I converted Rs. 5000 for one year. They are providing interest around 7.6% per annum, the online netbanking and mobile app is very convenient for deposit to FD.
I have invested my FD with ICICI BANK and also have a 3in1 account with them. The interest rate is pretty good. Recently started before 6months, I can do premature withdrawal and also have selected a locking period of 3 years. The customer service is good and overall am satisfied with this bank.
My Post office branch is located in own campus hence there is no queue. I opened the fixed deposit, I made one time investment for five years its has tax exemption. They are providing 7% of interest for per annum. I believe it has online access as well.
Chosen my fixed deposit from State bank of India. I have invested the money of Rs. 57000 and SBI is a most popular bank all over the India and offering all the facilities compared to bank. Since i have a salary account with them, its easy to transfer the money. They are providing the interest rate of 6.5%.
Union of India fixed deposit is same as other investment. Being an existing customer I have opt for one year of fd, the online banking feature is good to open and closing the account, they was no charges for the liquidity of fund before the maturity.
Chosen my fixed deposit from state bank of India because the given rate of interest is high. They are not deducting any service charges. I have invested the money of Rs. 1 lakhs and there is no lockin period and i have chosen the plan for 1 year and they are giving a interest rate of 6.75%.