If you invest in Tax Saver Fixed Deposit. Still, you have to pay tax on Tax Saver FD
Income from FD is taxable. It is added to your total income, but after deducting TDS. Therefore, before investing, understand the law of taxation(Tax on FD) instead of getting confused.
Banks deduct TDS (Tax on FD Interest)
Banks deduct TDS if you are earning Rs 40,000 or more every financial year through fixed deposits. Whereas in the case of senior citizens, this limit is Rs 50,000. If the income in a financial is less than this, then TDS is not deducted.
Example : Suppose if you have done FD for 5 years. The FD amount is Rs 10 lakh and the interest rate is 6% per annum. In this sense, the interest income every year will be Rs 60,000. That is, banks will deduct 10 percent TDS on FD interest. If you have not submitted PAN then TDS will be deducted at 20%. But if you have made an FD of Rs 1 lakh, then there will be income from interest of Rs 6000 annually. TDS will not be deducted on this, therefore no tax on FD.
Income Tax Calculation
Whatever income you are earning from FD interest is added to your total income (even in case you have not received interest till the time of tax calculation). In Income Tax Return (ITR), it is shown under the head ‘Income from other sources’. After that it is seen in which tax slab your income falls. The Income Tax Department adjusts the TDS, which has already been deducted, in your total tax liability. Even if the bank does not deduct TDS on interest(Tax on FD interest), show it in ITR. It is added to the total income and then the tax is calculated accordingly.
In case of multiple FD accounts, tax is deducted on the interest income earned from each account. Not just with a single FD account.
What is Form 15G/15H ?
Form 15G/15H is a form which shows your annual income from all sources. Form 15G/15H can be filed if your annual income is less than Rs 2.5 lakh. The bank does not deduct TDS after filing Form 15G/Form 15H in the bank. Apart from the bank, FD account can also be opened in the post office. Here less TDS is deducted from banks on FD.
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