Any interest you earn from your fixed deposit is a taxable income and not tax free, under the Income Tax Act 1961. The taxes will be levied on the individual as per their income tax slabs. The taxes levied on fixed deposits will be on an individual basis since each individual pays different tax rates based on their income. The income tax slabs range from anywhere between 0% - 30%.
The Tax Deducted at Source or TDS on fixed deposits is liable to have a deduction of 10% by the bank. The amount needs to be paid at the end of the financial year if it exceeds Rs. 10, 000 as that is the limit for each bank. The branch pays the TDS only when the interest amount exceeds Rs. 10, 000 in a financial year, but there are cases where you would have received an interest amount higher than Rs. 10, 000 from various branches but the interest per branch will not be exceeding Rs. 10, 000. So basically the bank make the payment of tax on the amount you earn with keeping a fixed deposit in one of their branches and this will be reflected in your Income Tax filing.
The answer is, yes! You will be charged TDS. The rules for charging tax are the same for all fixed deposits. The only difference between fixed deposits and tax-saving fixed deposits are that the amount saved in the tax-saving fixed deposits is exempt from tax under the section 80C.
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.
7th November 2017
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).
11th March 2016