Income Tax Saving on FD: Fixed Deposits (FDs) provide an investor guaranteed returns in the form of interest earned on deposits. One can also get tax exemption on deposits of up to Rs 1.50 lakh under Section 80C of the Income Tax Act on FDs of tenures of five years and above. The income an investor gets from FDs is tax free up to a certain limit, as per income tax rules. But over it, one needs to pay TDS. However, if one submits Form 15G and Form 15H under certain conditions, they can save their TDS from being cut. Know how-
Income Tax Saving on FD: Fixed Deposit (FD) is a popular option of investment in India. One can park their money in this guaranteed return investment scheme for a certain period and get the return on the completion of the scheme. The duration of the FD can be one-, two-, three-, five- and 10-years. While one get no income tax rebate on FDs of one-, two- and three-year durations, deposits in FDs or five years and above duration are tax exempted up to Rs 1.50 lakh under Section 80C of the Income Tax Act.
However, if the limit of interest earned through the interest rate in a FD exceeds the prescribed limit, it is taxed under TDS.
To avoid this, it is necessary to fill Form 15H and Form 15G when you are starting an FD.
Know the rule how TDS is deducted for FD earnings and how Form 15G and Form 15H can help you save income tax-
Read More: How to get your full salary in March with no additional tax burden
When is TDS deducted?
According to the income tax rules, if the income earned through interest on FD is more than Rs 40,000 annually, TDS is deducted.
This limit for senior citizens in the same case is Rs 50,000.
This TDS is added to the total income of the person and after that he is taxed as per the tax slab.
But if the income of a person is less than the taxable limit, then they have to fill Form 15G and 15H and submit it to the bank and request for not deducting TDS.
Read More: Income Tax Alert: File Your ITR-U By March 31 Or Face Up To 200% Penalty
Know what is Form 15G?
When an FD holder submits Form 15G and Form 15H to the bank, the person tells the bank that their income does not come under the purview of tax.
Form 15G can be filled by any person belonging to a Hindu Undivided Family and below 60 years of age.
Form 15G is a declaration form under Sub-sections 1 and 1(A) of Section 197A of the Income Tax Act, 1961.
Through this, the bank comes to know about a person’s annual income.
If your income does not come under the tax ambit, the bank does not deduct TDS on your FD earnings.
Read More: No long weekend for Income Tax department, all offices open from March 29-31
What is Form 15H?
Form 15H is similar to Form 15G, but it for FD account holders of 60 years and above.
By depositing this to their bank, senior citizens can stop TDS deduction from their FD interest earnings.
However, senior citizens whose taxable income is zero can only benefit from this form.
The form needs to be submitted in all the bank branches from where the money is being deposited.
If the interest income from any source other than deposits like loans, advances, debentures, bonds, etc., is more than Rs 5,000, Form 15H will have to be submitted.
Form 15H must be submitted before the first interest is paid.
Although this is not mandatory.
But if you do this, then TDS deduction from the bank can be stopped from the beginning.
If a customer fails to fill these forms, they can claim TDS in the income tax return in the assessment year. In such a case, you will get a refund from the Income Tax Department.
