Planning for FD? Know details before applying

Are you planning to take FD in a bank? Then read this article. It might be helpful for you.

Kotak Mahindra, ICICI and Yes Bank have recently increased the interest on fixed deposits (FD). Now you will get interest up to 7.75% on FD in Yes Bank. In such a situation, if you are planning to get FD in these banks or any other bank, then you should also know about their interest rates.

Tax is also to be paid on the interest received from FD.

The interest received from FD is completely taxable. Whatever interest you earn on FD in a year is added to your annual income. Based on the total income, your tax slab is determined. Since interest income earned on FD is considered “Income from Other Sources”, it is charged under Tax Deducted at Source or TDS. When your bank deposits your interest income into your account, TDS is deducted at the same time.

The bank does not deduct TDS on fixed deposits if your total income is less than Rs 2.5 lakh in a year. However, for this you will have to submit Form 15G or 15H. In such a situation, if you want to save TDS then definitely submit Form 15G or 15H.

If your interest income from all FDs is less than Rs 40,000 in a year, then TDS is not deducted. Whereas if your interest income is more than Rs 40,000 then 10% TDS will be deducted. Bank can deduct 20% for not giving PAN card.

This limit for deducting TDS on interest income more than Rs 40,000 is for people below 60 years of age. At the same time, income up to Rs 50 thousand from FD of senior citizens above 60 years of age is tax free. If the income is more than this, 10% TDS is deducted.

If the bank has deducted TDS on your FD interest income and your total income does not come under the ambit of income tax, then you can claim the deducted TDS while filing taxes. This will be credited to your account.