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. The interest earned from Fixed Deposit is taxable, as the rest of your income.
When filing your taxes, 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.
As per Section 194A of the Income Tax Act, people getting an interest amount of more than Rs. 10,000 from their fixed deposits, but were not liable to pay income tax, were also being taxed. Forms 15G/15H are for such individuals, who can furnish them for nil or lower deduction of TDS. Here’s a look at how Form 15G and Form 15H can help you:
– Individuals who are below 60 years of age, can submit Form 15G to their financial institutions.
– This form should be submitted by senior citizens, but it is important to ensure that the final tax on the estimated total income should be nil for the financial year. It is however, important to submit both these forms at the start of the year, because the interest once deducted by the financial institution cannot be refunded.
As per Budget 2018, Tax Deducted at Source (TDS) exemptions have increased to Rs. 50,000 on bank deposits. Additionally, senior citizens can seek a tax exemption up to Rs. 50,000 on fixed deposits.