5 Income Tax Rules a bank FD Investor Should Know
1) Interest income earned from bank fixed deposits is fully taxable, unlike savings bank account where one gets income tax exemption on interest earned up to Rs. 10,000 a year. In case of bank fixed deposits, banks deduct tax at source (TDS) at the rate of 10 per cent if the interest income for the year is more than Rs. 10,000. TDS is calculated by checking the combined interest income of all branches of a particular bank. Recurring deposits also come under the purview of TDS. It should be noted that if the interest payable by the bank during the financial year on fixed deposits exceeds the taxable limit, then the Form 15G submitted will be treated as invalid. Many banks allow submission of Form 15G or 15H forms online.
2) Bank fixed deposit investors who are not in the tax bracket are advised to furnish Form 15G/15H to avoid getting the TDS deducted by the bank. If one fails to do so, the person will need to claim the tax refund by filing his or her income tax return (ITR). The interest received on fixed deposits is added along with other income and you have to pay tax on that income at an interest rate applicable to you. These rates are shown under income from other sources.
3) For those who come under tax slabs, here is a caution. Sandeep Sehgal, director of tax and regulatory at Ashok Maheshwary & Associates LLP, says: “It would be counterproductive for him/her to have no TDS deducted as advance tax provisions are applicable for other income and the person may not have paid adequate advance tax when these were due and will result in payment of interest along with taxes. If some amount is already paid as TDS, the person can save interest at least to that extent.”
4) Banks issue a TDS credit certificate for deducting tax. The depositor can claim this as a deduction, if applicable, while filing his or her tax return.
5) Form 26AS: This is a crucial document that a salaried individual should access before filing tax return. Tax is deductible from various sources such as salary and bank deposit, subject to applicable exemption limits. Form 26AS is basically your tax credit statement which shows all taxes received by the Income Tax Department. You can access Form 26AS from the income tax department's website. Taxpayers can also view Form 26AS via net banking. Select banks offer this facility. "It is extremely important to go through the Form 26AS to ensure that all due credits for TDS deducted from a person's salary, FD interest, etc. are duly accounted for," adds Mr Sehgal
1) Interest income earned from bank fixed deposits is fully taxable, unlike savings bank account where one gets income tax exemption on interest earned up to Rs. 10,000 a year. In case of bank fixed deposits, banks deduct tax at source (TDS) at the rate of 10 per cent if the interest income for the year is more than Rs. 10,000. TDS is calculated by checking the combined interest income of all branches of a particular bank. Recurring deposits also come under the purview of TDS. It should be noted that if the interest payable by the bank during the financial year on fixed deposits exceeds the taxable limit, then the Form 15G submitted will be treated as invalid. Many banks allow submission of Form 15G or 15H forms online.
2) Bank fixed deposit investors who are not in the tax bracket are advised to furnish Form 15G/15H to avoid getting the TDS deducted by the bank. If one fails to do so, the person will need to claim the tax refund by filing his or her income tax return (ITR). The interest received on fixed deposits is added along with other income and you have to pay tax on that income at an interest rate applicable to you. These rates are shown under income from other sources.
3) For those who come under tax slabs, here is a caution. Sandeep Sehgal, director of tax and regulatory at Ashok Maheshwary & Associates LLP, says: “It would be counterproductive for him/her to have no TDS deducted as advance tax provisions are applicable for other income and the person may not have paid adequate advance tax when these were due and will result in payment of interest along with taxes. If some amount is already paid as TDS, the person can save interest at least to that extent.”
4) Banks issue a TDS credit certificate for deducting tax. The depositor can claim this as a deduction, if applicable, while filing his or her tax return.
5) Form 26AS: This is a crucial document that a salaried individual should access before filing tax return. Tax is deductible from various sources such as salary and bank deposit, subject to applicable exemption limits. Form 26AS is basically your tax credit statement which shows all taxes received by the Income Tax Department. You can access Form 26AS from the income tax department's website. Taxpayers can also view Form 26AS via net banking. Select banks offer this facility. "It is extremely important to go through the Form 26AS to ensure that all due credits for TDS deducted from a person's salary, FD interest, etc. are duly accounted for," adds Mr Sehgal
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