Tax deducted at source, or TDS, is interest directly deducted from people when they receive payments, salaries, fees, commissions, rent or income from any other sources. Whether FDs are taxable or not, remains a question that hounds almost everyone.
The interest earned from Fixed Deposit is taxable. These are taxed at the same rate, as the rest of your income. Many times, income earned from FDs is missed out from tax returns, which leads to a notice from the Income Tax Department.
To avoid this situation, you must declare your FD under ‘Income from other sources’, depending on the taxable amount limit, as per your financier.
If you deposit a large sum in your FD, tax deductions are incurred at source. The interest will be taxed at the same rate as your gross income, which means it can vary from 0% to 30%. For example, if you fall under the 30% income tax bracket, you will have to pay 30% tax on the interest earned from your Fixed Deposit. But, if the interest earned does not exceed Rs. 10,000, then you don’t have to pay any tax on the interest.
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