How is the Interest Earned on a Fixed Deposit Taxed in India

Explore the taxation of Fixed Deposit interest in India. Learn about income tax slabs, exemptions, and maximizing returns through effective tax planning.
TAX on FD
3 mins
21 February 2024

If you want to save for your financial objectives without taking on too much risk but receiving guaranteed returns, a fixed deposit (FD) is the way to go. Knowing what you are going to get in return is also quite simple. You only need to utilise Bajaj Finance Fixed Deposit Calculator. That is why, fixed deposits are one of the most popular investment choices for most individuals who frequently earn interest on them.

Is fixed deposit interest taxable?

Yes, the interest earned on a fixed deposit is taxable. The interest earned is added to your income and taxed at the applicable income tax rate. It is important to note that the interest earned on a fixed deposit is taxable even if you have not made a profit on your investment. The tax on FD interest is deducted as TDS at the time of yearly interest credit. TDS is automatically levied by the bank on the interest received on your fixed deposit each year. Every year, a tax on interest earned is assessed to disperse the burden of tax payment. TDS is deducted by the issuer when interest is generated, not when interest is received.

The income tax on interest earned on a fixed deposit is calculated as per the income tax slab of the individual. The interest earned is added to the individual's total income and taxed accordingly.

How can you save tax on fixed deposit interest?

One way to save tax on fixed deposit interest is by investing in tax-saving fixed deposits. These fixed deposits are eligible for tax exemptions under Section 80C of the Income Tax Act. Another way to save tax on fixed deposit interest is by investing in a fixed deposit in the name of a senior citizen. Senior citizens are eligible for a higher exemption limit on the interest earned on a fixed deposit. With Bajaj Finance Fixed Deposit senior citizens can earn extra interest of 0.25% on the current FD interest rate.

With our FD calculator, you can easily calculate the return you will get on your amount for a chosen tenure. This will help you in deciding the amount and tenure for investment.

Opening a Bajaj Finance Fixed Deposit is a smart choice since you not only earn good returns, but your investment remains safe. With our [ICRA]AAA(Stable) and CRISIL AAA/STABLE ratings, our fixed deposits becomes one of the most safest investment options in the country.

Interest on fixed deposit taxable comes under which head?

The interest earned on a fixed deposit is taxable under income from other sources and is added to the individual's total income and taxed accordingly. However, if your total income is below the taxable limit, you do not have to pay any TDS on the interest earned on a fixed deposit. Additionally, if you have submitted Form 15G or Form 15H to the bank then also you are not required to pay any TDS. The exemption limit is Rs. 50,000 for senior citizens, while it is Rs. 10,000 for others.

Try to invest smartly to save the tax on your fixed deposit. Invest at any time of year. TDS will be disbursed in two years whether the FD amount is made at the end of the fiscal year or in the middle of the year. This may cause the interest computation for a given year to fall below Rs 10,000, in which case no TDS will be deducted.

To save tax on the interest earned on your fixed deposit, prefer to invest in the name of a senior citizen. It is also important to understand when TDS is not required to be paid and how to claim a refund if TDS is wrongly deducted. Investing in a fixed deposit can be a great option for those looking for a low-risk, stable return on their investment, but it is essential to understand the taxation before investing. Open a Bajaj Finance Fixed Deposit with just Rs. 15,000 and earn handsome returns on your investment.

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.