TDS on Fixed Deposit

Know all the details about TDS and download form 15G and form 15H to save your taxes.
3 mins
14 Oct 2022

Just like your earnings apply to tax deductions, the interest you earn from making various investments is also applicable to tax deductions, also known as tds on fd. It varies from instrument to instrument. Some financial tools are tax saving havens, like the PPF and various life insurance policies. In contrast, some are taxed heavily based on the nature of earnings like income generated from the equity stock market. Before elaborating on how TDS affects your fixed deposit  investment earnings, here’s a quick summary of the basics.

What is a Fixed Deposit?
The fixed deposit is a fixed income generating instrument where you can park your savings and surplus income at a fixed rate of interest that is applicable throughout the tenor you choose. This interest rate is not based on market movements and is stable throughout the tenor, making this a very safe and low risk appetite investment option, best for long-term financial goals. At maturity, the investor receives the principal amount and the accrued interest over the tenor. The interest earned by investing in Bajaj Finance Fixed Deposit is taxable.
Book an FD

What is TDS?
Tax Deducted at Source (TDS) is a term used to define the concept of collecting tax from the income source of an individual. This process is done centrally by the Income Tax Department of the Government of India. However on filing the Income Tax Returns the deductee, whose income has been taxed, can get the amount deducted by submitting the Form 26AS or TDS certificate issued by the deductor. TDS is fully applicable for interest earned on fixed deposits.

Everything about TDS on FD investments
Fixed deposits offered by banks and NBFCs are all applicable to tax deductions. Different thresholds of deductions on interest earnings are applicable to different age groups.

1. TDS on Bank FDs
Interest income will be taxable if the earnings exceed Rs. 40,000 for citizens aged below 60 and up to Rs. 50,000 for senior citizens. The TDS is deducted at 10%.

2. TDS on non-bank (NBFC) FDs
For non-bank (NBFC) FDs, the threshold limit for tax deduction is Rs. 5,000. The interest income will be taxable if the earnings exceed Rs. 5,000 in the case of a company FD. The TDS is deducted at 10%. But if the interest you earn on FDs exceeds the amount mentioned above, and you fail to share your PAN details with your bank or NBFC, the TDS to be deducted doubles to 20% of the interest earned.

Indian residents pay lesser TDS compared to their NRI counterparts, 10 and 30 percent respectively. For both cases, you can submit Form 15G or Form 15H at the beginning of the financial year to claim tax benefits.

If your total income is below the tax slab threshold, you can either submit supporting documents or file for a TDS return later.

About Form 15G and 15H
Form 15G and Form 15H are documents that declare your income is below the minimum tax slab for the particular financial year. Citizens aged above 60 years are also exempted from paying TDS on interest earned on fixed deposits if their total income from investments does not exceed Rs. 2,50,000. All they need to do is submit Form 15H. If the TDS has been applied and your total income is below the minimum tax slab, then you can claim a TDS refund on fixed deposit income while tax filing annual IT returns.

With this information you can now start your investment journey and plan to manage tax deductions wisely.

Download Form 15G and 15H