Fixed Deposits and Tax


Fixed Deposit(FD) is an investment product which allows you to invest a lump of money for a fixed time period and at a fixed rate of interest. It is quite popular form of investing in India. Overview of Fixed Deposits as the name suggests give an overview of Fixed Deposits, while Fixed Deposit and Interest Rates discussed the interest rates in FDs. When you open a fixed deposit with bank then you are lending money to the bank and it pays you interest. Applicable interest rates will be given as on the date of receipt of the funds by the bank and is fixed for the specified duration. And interest that is earned on fixed deposits is taxable in the hands of the depositor.  Tax or TDS is deducted by the bank, after a threshold. This article throws light on Taxation aspect of Fixed Deposits.

Tax Deducted At Source or TDS

If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in all branches(before 1 June 2015 it was per branch) is greater than Rs 10,000 in a financial year, you become liable for TDS. TDS is deducted every time the Bank pays interest during the financial year and the interest earned for the year is more than Rs 10,000 in a single branch . in all the branches of bank from 1 June 2015. In addition, TDS is also deducted on interest accrued (but not yet paid) at the end of the financial year.For example, if an investor has earned Rs 20000 as an interest in one year, then the bank would deduct Rs 2000 and pay only Rs 18000 as the amount exceeds the limitation of Rs 10000.

A consolidated TDS Certificate in Form 16A, for TDS deducted during a financial year will be issued in the month of April of the following financial year. TDS Certificate shall specify valid Permanent Account Number (PAN) of the deductee, valid Tax Deduction Number (TAN) of the branchChallan identification Number and receipt No of the quarterly statement. Challan identification Number means BSR code of the branch where tax has been deposited, date on which deposited and challan serial number given by the bank.


Some points to note for Fixed Deposits:

  • Tax liability for TDS is determined at branch level. One of easiest way adopted by many depositors is to spread their investments across various branches so that the interest earned in a particular branch is below Rs10,000 in a financial year. From 1 June 2015 TDS will be levied if the combined interest income from FDs in all branches of a bank exceeds Rs 10,000 in a year.
  • Tax liability is calculated on the first applicant’s name. Deposits held by minors are also subject to TDS. In this case the interest income will be clubbed under the income of the person in whose hands the minor’s income is included.
  • Investors often book fixed deposits in the name of non-earning family members such as spouse. The rule is that if the money is gifted to a non-earning member and the deposit is booked in his or her name, then the person has to submit a declaration saying his or her income is not taxable. However, when income tax is calculated, it will have to paid by the donor or earning member

TDS on fixed deposits is deducted at the following rates for the following category of account holders:

Type of Account Holders  TDS (%)
Resident Individuals, Sole Proprietorship, Trusts, Association of Persons,HUF under section 192  10%
Domestic Companies  20.4%
NRO Deposits  30.6%

Avoiding TDS

  • Distributing FD investment:Split the FD to separate banks or branches of banks in such a way that interest earned from any of the FD does not exceed the Rs 10000 limits. This option no longer works as from 1 June 2015 TDS will be levied if the combined interest income from FDs in all branches of a bank exceeds Rs 10,000 in a year.
  • Timing the FD: The TDS can also be saved by timing the FD in such a way that interest for any of the financial years does not exceed Rs 10000. For example, a 12-month FD of Rs 1 Lac @ 10.5% could be started in September as the financial year closes on 31st March so the interest would split in two financial years, and hence TDS could be avoided.
  • By Submitting Form 15G/15H

By Submitting Form 15G/15H

If you believe that your total interest income for the year will not fall within overall taxable limits, you should inform the Bank not to deduct TDS on deposits. You can do this by submitting a form as per the provisions of the Section 197A of Income Tax Act. Quoting from Section 197A

The Finance Act, 1982 has inserted a new section 197A with effect from June 1, 1982. The section enables an individual who is resident in India and whose estimated total income of the previous year is less than the minimum liable to income-tax to receive interest on securities, dividends and other interest without deduction of tax at source under sections 193, 194 and 194A of the Act on furnishing a declaration, in duplicate, in the prescribed form and verified in the prescribed manner. Rule 29C and Form Nos. 15F, 15G and 15H have been inserted in the Income-tax Rules, 1962 by the Income-tax (Fifth Amendment) Rules, 1982 prescribing the forms for the purposes of section 197A and laying down the procedure for furnishing the declaration form.


The forms required for different categories have been listed below:

 Category of Tax Payer Income Tax Section
Individual:Senior Citizen Sub-section (1C) of section 197A  15H (pdf)
Individual:Non senior Citizen Sub-sections (1) and (1A) of section 197A  15G(pdf)
Trusts/SocietiesAvailable from Assessing Officer  15AASample form(pdf)

Rule 29C of Income Tax Rules offers individual taxpayers the facility of furnishing Form 15G or 15H, as the case may be, requesting the payer of income not to deduct any tax. These forms have to be filed in duplicate and once the bank or the post office takes them on record, the entire interest is paid to the investor without any tax deduction. Important points that one needs to remember is

  • Fresh forms are required to be filed each year. As incomes of investors may differ from year to year, the eligibility for furnishing the forms has to be ascertained every year.
  • Secondly, for optimum benefit, these forms need to be furnished at the beginning of the fiscal such that the entire amount of interest escapes TDS. If the form is filed during the year, the tax already deducted cannot be adjusted against future tax deductions.

The main difference between Forms 15G and 15H is that Form 15G is meant for non-senior citizens whereas Form 15H is meant for senior citizens only.In order to be eligible to furnish Form 15G, the non-senior citizen investor needs to fulfill the following two conditions:

  1. The final tax on his estimated total income computed as per the provisions of the Income Tax Act should be nil and
  2. The aggregate of the interest etc. received during the financial year should not exceed the basic exemption slab i.e maximum amount not chargeable to tax, which is Rs1,80,000 for men and Rs1,90,000 for women for.

If both these conditions are satisfied, Form 15G may be furnished to the bank or the post office and the entire interest income can be received without tax deduction.

Form 15H imposes just the first condition, in that, the final tax on the investor’s estimated total income computed as per the provisions of the Income Tax Act should be nil. The second condition imposed by Form 15G is not applicable in the case of Form 15H.

TDS and PAN Number

As per section 206AA introduced by Finance (No. 2) Act, 2009 wef 01.04.2010, every person who receives income on which TDS is deductible shall furnish his PAN, failing which TDS shall be deducted at the rate of 20%(as against 10% which is existing TDS rate) in case of Domestic deposits and 30.90% in case of NRO deposits

Please further Note that in the absence of PAN, as per CBDT circular no:03/11, TDS certificate will not be issued, form 15G/H and other exemption certificates will be invalid even if submitted and penal TDS will be applicable.

Ref:DNA:Start tax planning in the new financial year: Five things to do(Apr 2010), BCAJournal(Jun2010), Rediff

Interest and Income Tax

Interest earned on Fixed Deposits needs to be accounted for while filing your income tax returns for the year. Tax on interest of FD is as per the depositor’s income slab If TDS is deducted, it is at only at 10.2% for individuals for remaining part tax needs to be calculated. Interest income is under the head “Income from Other Sources” in the income tax return. TDS (if deducted) on the said interest income can be claimed by the individual in the income tax return.

Under the Act, an individual has an option to either offer income on cash (receipt) or mercantile (accrual) basis according to the method he regularly follows.

  • Where you follow accrual basis for disclosing your income you could claim credit of TDS in the same FY since both in case of interest on fixed deposit with Bank  tax would be deducted in the same year i.e. on accrual basis.
  • Where the interest income is offered to tax on receipt basis i.e. at the time of maturity, you should be eligible to claim credit of TDS only in the FY in which such interest income is offered to tax. However, in such a case you must ensure that correct disclosure is made in all the forms (Form 26A, Form 16A) and returns (personal income tax, e-TDS) with respect to the year in which tax was deposited and the credit of the same is claimed.

How to get TDS refund. If your tax liability is nil, but the bank has levied TDS on the interest earned on your fixed deposit then you can claim refund by filing your income tax return. Customers can take their TDS certificates (Form 16A) from banks and also check the amount deposited to the Income Tax Depart-ment based on their PAN number on the Income Tax website under Form 26AS. Based on the same, customers can apply to get the refund from the IT department.

Tax Saving Fixed Deposit

There is difference between Fixed Deposit and Tax Saving Fixed Deposit. In 2006 Indian government announced bank fixed deposits booked by an individual/HUF for 5 years and up to Rs. One Lac or Rs. 100,00 will be eligible for exemption. This exemption would be under section 80C of the income tax act 1961. The interest rates on tax saving fixed deposits are generally calculated on a quarterly basis and the interest is reinvested into the fixed deposit. Ref:rupeetimes:Tax saver fixed deposits in India earn you more

Related Articles:

Hope the post helped in understanding the taxation of Fixed Deposits

http://www.bemoneyaware.com/blog/fd-interest-tds-tax-itr-refund/

The budget has proposed that TDS should be levied if the combined interest income from FDs in all branches of a bank exceeds Rs 10,000 in a year.


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145 Responses to Fixed Deposits and Tax

  1. Bhasha says:

    Can we invest in multiple banks to avoid TDS deduction from the new rules. For eg. instead of investing Rs. 100000/- each in various branches of a particular bank, is it wise invest Rs. 100000 in several banks to avoid TDS. the rules interest accrued in all branches of a bank and not says interest accrued in all banks. Kindly clarify

  2. Sai Ram says:

    Hi,
    Your Posts are really very useful and informative. Can you please clarify mine below query .
    Say a person got retired and got ten lakhs amount,now he had transferred amount to his wife who is a house wife (not earning) and made FD on her name.As interest exceeded 10000 rs TDS was deducted.Now can she file IT and claim refund TDS amount.What investigation IT department do,whether they ask from where you got this money .If the wife says she got money from her husband then Does retired person has to file IT ,please tell me.
    Thanks in advance.

  3. VISHAL says:

    i want to open FD in bank of around 8-10 lac in my sister account which is unemployed. guide me whether should i fill 15 g. which ITR form should i fill. she has pan card.

    • bemoneyaware says:

      That’s a great thought.
      Assuming your sister is an adult i.e above 18 years of age.
      You are gifting money to your sister. Just have a simple document with both your signatures.

      the interest income from the bank FD will not be tax-free . It will not be taxed as income in the hands of your sister, who is non-earning and therefore likely below the taxable income threshold.

      Assuming a 8.2% interest on 10 lakh invested, interest earned is shown below
      2015-2016 590249.76
      2016-2017 893561.90
      2017-2018 971025.87
      2018-2019 1053130.67
      2019-2020 1144614.52
      2020-2021 354753.28

      If you sister wants to save TDS she would have to submit Form 15G.

  4. Arnab says:

    Hi,

    Lets say I am investing rs 1 lac ( 100000 /-) in fixed deposit for 24 months at an interest rate of 8.35 percent.

    The interest gained per year will be as follows :

    2015-2016 6299.49
    2016-2017 9137.39
    2017-2018 2535.12
    TOTAL INTEREST 17972.00

    In this case, interest gained in any year is not exceeding 10k per year.

    My two queries here :
    a) as interest earned is not exceeding 10k, should any TDS apply?
    b) I am falling under 20% tax bracket, so how much tax will be deducted even if my interest earned from FD for a particular year is less than 10k?

    Please give suggestions.

    Thanks,
    Arnab

    • rakesh kumar says:

      you will have to pay 20% tax since you fall in this bracket as the interest earned from FD is fully taxable. and added to you total income

      thanks

    • bemoneyaware says:

      Sir Interest of FD is fully taxable as per your income slab irrespective of whether TDS is deducted or not.
      please show interest earned every year as Income from Other sources.

  5. Deepak says:

    My employer paid cess and deducted rebate under 87A but for bank interest, Bank has not added 3% cess and considered rebate. So that will not match with schedule TDS. So in ITR1 income details it will show additional Rs. 40 on scheduled TDS. Is it necessary to pay Rs. 40 or can be carried forward. Is it necessary to match Tax payable and TDS1 and TDS2?
    Pl. Help.

    • Kirti says:

      Sir tax on FD is fully taxable as per your income. Yes Bank does not deduct the 3% cess so you have to account for it in your tax calculation.
      You should enter full interest on FD in Income from other sources and actual TDS deducted as in Form 16A and Form 26AS

  6. Amit Kaur says:

    Dear BeMoneyAware,

    Apparently, there is a 3-ring circus with bank and Central Government acting as monkeys while the depositor plays the fool. After literally months of banging my head as I crunch numbers, the idiocy of the Indian system is clear as day. My hope is that you make sense of this, as I am at a loss and have no more brain cells left to figure it out. There are millions of Indian in the same boat, and it is embarrassing to see so little CORRECT information.

    I am a US citizen with NRO accounts in India. These FD’s (fixed deposits) mature in 1.5 to 2 years. There is a LOT of confusion out there as to how to report interest. Some say to report it as accrued even when bank has not actually paid you nor paid TDS (30.9%) to the Central Government. When reading the Income Tax Department FAQ, it says very clearly that banks do not deduct TDS on quarterly/yearly basis, they can do so IN THE FOLLOWING YEAR. It further states that they will not be held in default for late payment, and neither will there be any adverse consequences to taxpayer where banks fails to deduct TDS. Ultimately, taxpayer is still held liable for tax. So it appears from all that language that a taxpayer can report interest received/taxes paid when banks (monkey #1) reports to Central Govt (monkey #2), and this will be reflected on Form 26as.

    Now this is where we Indian FOOLS come in. We’re told by many sources, to report interest as accrued. Taking the accrual approach, I would report interest I haven’t received into my account nor has it been entered on Form 16a or 26as. And if I report accrued interest, then it follows I have to report accrued tax! In other words, it seems I have to pay a REAL 30.9% tax on that “phantom interest” to the Central Govt. How is this fair or correct? Both monkeys are playing the fool! The bank fails to deduct TDS on purpose, and the Central Govt doesn’t punish them. On the contrary, they want us to pay self-assessment tax using challans! Instead of paying interest quarterly and deducting taxes on same, the banks place unnecessary burden on their depositors!

    Still others say to avoid all the above and just report on maturity. Or better, just report whatever you see in Form 26as. As long as interest/tax reported matched 26as details, you will be good. But if those two monkeys are not going to follow their own laws, then it throws a monkey wrench in USA REPORTING REQUIREMENTS! In US, out foreign tax credits are valid only for tax years to which those taxes are applicable; and for those of us who have FDs that span multiple years, there is no way to avoid double taxation when those two monkeys can’t get this right!

    Please, please, please….respond kindly with thoughts/advice. I’m quite sure that many are in the same boat as I. And we will all appreciate someone who still has some brain cells left.

    • Kirti says:

      Sir so true. It is so confusing for an ordinary person and unknowingly many end up being defaulters. But things are improving slowly but surely.
      While we can raise these issues question is how to address the problem.
      So if I make FD in which in 1st year interest is less than 10K so no TDS will be deducted but in 2nd year TDS is more than 10K then TDS will be deduced. But will TDS be deducted for income of only second year or both year? Let us dig up the answer to this question. What do you say?

  7. Deepak kumar says:

    i am a banker ,,,,one of the customer having a fixed deposit with us since last financial year…according to her he never submitted 15G form and she wanted for TDS DEDUCTION but our end SYsTEM not deducted TDS for any resion. how we rectify the issue

    Thanks.

  8. shivanand says:

    my wife has made fd from her fathers gift amount and earns interest of rs3,00,000 ,what is tax exmption & tax she has to pay

  9. Prabir Dey says:

    Thanks for various information received in this blog.
    I have some quiries:
    1) I retired on 31st January,2015 and received I/Tax reflection in Form 16 up to 31st January,2015.
    2) My Pension has yet not started but the Pension amt. for Feb & March, 2015 will fall under FY 2014-15.
    Now kindly tell me the procedure how the I/Tax for FY 2014-15 should be computed and reflected in the I/Tax Return ? Awaiting for your reply Pl.

  10. Prabir Dey says:

    Suppose I fixed Rs.2.5 Lakh In Bank in April, 2014 with rate of intt. 8% . Which is non taxable income.
    Now I earned Rs.2,70,000 in April 2015 and duly reinvested in FY 2015.

    Now question arise that what will be my income to reflected in FY 2015 ?
    Is it Rs. 2,70,000 or 20,000 (earned as interest on FD)for FY 2015 ?

    Pl. reply

  11. Prabir Dey says:

    Thanks for different relevant reply up to the satisfaction.
    Now I eager to know whether rolled over FD Amount is treated as Income for the same Financial Year ?
    As example:
    1) I fixed an amt. of Rs.1 Lakh at Bank @ 8.5% in FY 2014
    2) The rolled over amt. of FD Rs.1,08,500 is re fixed In FY 2015

    Now Rs. 1 Lac was computed as Income for FY 2014.
    Whether the total rolled over amt. Rs.1,08,500 will be computed as Income for FY 2015 or only 8,500 earned on interst ?
    Kindly let me know at the earliest pl. e-mail : pkdey1955@rediffmail.com

  12. sam says:

    hello,
    1. i want to get one thing clear that if any fixed deposit which is for 3 years then i have to get the interest calculated for each year among the 3 years and show it in my ITR….or i have to show in only that year in which my fixed deposit is getting matured i.e. after 3 years?

    2. if any FD is getting mature and if i am not taking that matured amount inplace of that i am extending that fixed for some more years then also i have to show the interest as my interest income.(if i am extending the fix deposit without taking back principal+interest amount)???

    • admin says:

      Very interesting questions
      1. If Fixed Deposit spreads over multiple financial years then there are two cases
      a) when interest each year is more than 10,000 so bank will deduct TDS at the rate of 10% and it will show up in Form 26AS; In such a case please show interest in the same year so that TDS is claimed.

      b) when interest each year is less than 10,000 bank will not deduct TDS so you can opt whether u want to pay interest every year or at maturity.

      2. The Fixed Deposit if extended is like a fresh investment in the year that got extended.
      Suppose one made FD in FY 2009-2010 say Jul 26 2009 for principal amount Rs 1,00,000 at rate of 8% and it got matured on 26 Jul 2012. Maturity amount was 126824.18 (if compounded quarterly) with 26824.18 as interest. So if one extends on 27 Jul it would be considered as Fresh investment with principal of 126824.18.

      Did we explain your queries satisfactorily?

      • Prabir Dey says:

        I am not quite cleared on your reply. My question was about Principal income. Say I Invested 2 lakh on FD for FY 2014 and interst earned @ 8% was 16000 for FY 2014-15.
        Now I reinvested the total amt. i.e. 216000 for FY 2015-16.
        Again I invested Rs.2Lakh in FY 2015-16.
        What will be my total Income for FY 2015-16 to be reflected in ITR ?
        Pl. clerify.

        • Prabir Dey says:

          I did not get reply regarding quiries for total taxable income may be accrued due to roll over of FD in next FY as posted earlier — pl. reply.

          What income is eligible to get benefit of u/s 87A ? Is it Gross Income or Taxable Income ? — Pl reply.

          In a Financial year some portion is taxable under 1) Service earning and some portion of income from Pension.
          —— Procedure for filing IT Return may please be computed with example. Many thanks anticipating your reply.

  13. Pankaj says:

    I fall in 20% IT slab. I have earned around 73,000 as interest from Bank fixed deposit. For this part bank has deducted 7,300 as TDS. I have 2 questions

    1) I have to deposit 10% and surcharge more on 73,000 as I fall in 20% slab. So, was i supposed to pay advance tax as the total tax liability exceeded 10,000 (please note 7300 has already been deducted as TDS by Bank in the financial year 2011-2012). If yes then will i will have to pay penal interest?

    2)A bit non official. If I don’t show this interest income in IT return, what are the chances of getting caught ( the TDS is being reflected in 26AS)

    • admin says:

      Pankaj answer to your questions
      1.Yes you have to pay penalty under section 234A,B,C as your income-tax due was more than 10,000. Our article Examples of Income Tax Calculation explains similar situation(interest on saving bank account) with example. Let us know if you still have some doubt.
      2. With all financial transactions being tied to PAN number it is difficult to escape income tax. Better pay and sleep in peace.

      • Pankaj says:

        Thank you sir for your quick reply.

        I have seen your example. However , in my case already Rs 7300 has been deducted as TDS by bank and my liability is around Rs 7500 more.ITax does provides a cushion of Rs 10000/-( if I am correct), will that cushion not applicable for me. Moreover when I am filling the online form of IT dept , it is not showing any penal interest for this amount. Please guide me.

        Thanks again for the advice on 2nd question. I was wondering whether IT dept does matches data for small tax payers like whose taxable income is just above 5 lakh

        • admin says:

          It is possible that because of your FD and interest on saving bank account you need to pay tax. If the tax owed is less than 10,000 Rs then there is no penalty.
          So as you rightly said cushion of Rs 10,000 is applicable to you. You just need to pay self-assessment tax for the amount due.
          We have shown the case in the example for filing ITR

          Coming to your second question:
          You never know. For people who file their returns it is easy to validate and catch. Last year people got notice for amount as little as Rs 1.
          Times of India: No need to respond to tax notices for below Rs 100(Jan 2012)

          • Shanthi says:

            I cannot understand your clarification. I have earned Rs 15000 as interest from Savings+ account, for this the bank recovered a corresponding TDS of Rs1500. I come under 30% tax slab. According to the Examples of Income Tax Calculation I should consider the whole of Rs 15000 for self assessment tax. But based on the above comment can I avail a cushion upto Rs10000 so that only Rs 5000 is taken as taxable interest income?

          • admin says:

            Shanti thanks for asking.
            Let me clarify Entire 15,000 is taxable.
            Cushion of Rs. 10,000 is for advance tax payment. If the total tax due by a tax-payer in the year is more than 10,000 then tax-payer has to pay advance tax else he is liable to pay Penalty under section 234(A,B and C).
            Advance Tax:Details-What, How explains it in detail.
            Hope it clarifies. Else please ask your doubt again.

  14. chandrani says:

    hi,
    I am a house wife. My interest on FD is Rs.10980 and TDS deducted by bank is Rs.1427. I have my Form16 from bank and the same amount is reflected in my form 26AS . I want to get back my TDS amount as I have no other income. What form should I use to do so? what is the procedure to E-filling income tax?

  15. Prakash says:

    Thanks for sharing detailed information on taxation!

    I am salaried individual & Form 16 is issued from my organsiation. I will be glad if you could clarify my below query:

    1. My SB account is linked to FDs – Few are monthy interest payable & few are cumulative. I had given Form15 in middle of the year(which now I understand is not required?!)and now I have Form 16A from Bank for 3 quarters. I have asked for the Interest income details from bank. How should I calulate my Tax in this case?

    2. I have investments in shares. Have got Short term capital gain Tax & LT.. report from them. Should I pay tax only on ST Capitial gains at 15%? Pl let me know.

    • admin says:

      Thanks Prakash just trying to help people with what I have struggled over the years.

      1. Please verify that TDS given in Form 16A matches with Form 26AS.
      1a. Interest on Saving Bank Account and Fixed Deposit is taxable as per the income slab. Please go through our article Examples of Income Tax Calculation.

      2. You have Short Term Capital Gain so as you rightly said you need to pay tax at rate of 15%.
      As you have Capital gain you have to use ITR 2.

      • Prakash says:

        Thanks for your reply!

        Few more queries:

        1. The TDS is matching in Form 26AS with Form 16A given by bank. But I am not sure how to calculate my interest income. Since all my FDs are linked to my SB I got a interest income certificate from my bank. Should I take that as reference and calculate tax as per my Slab?

        2. In that case can I deduct the TDS amount and pay the difference as tax?

        3. How is dividend income from equity taxed?

        4. How is short terms capital gains from liquid funds taxed?

        Due apologies for taking undue privilege and shooting questions! Even after the simplification exercise mortals like us are not able to really understand the taz implications…

        • admin says:

          Prakash asking question is the sign of thinking and we don’t mind it at all. We are in same boat as you – we are learning through writing about the answers to the questions that we came up with.
          We don’t know about how to do it because we were not taught so please don’t belittle yourself.
          So keep on shooting questions and we shall try to answer them with the best of our abilities.
          Ans to your queries now.
          1. Yes you can take TDS deducted as reference. Form16A (and Form 26AS) show the interest earned on which 10% tax was deducted.
          2. Yes you have to claim 10% tax deducted and pay for remaining amount as per your income slab.
          3. Dividend from equity is TAX -FREE so it is not taxed. It comes under Exempt income in Income Tax Return.
          4. Short Term Capital gains are taxed at 15%.
          You can go through our article Filling ITR 1-Form and Filling ITR-1 : Bank Details, Exempt Income, TDS Details to get some more idea.

  16. Vivek Anand says:

    Hi,

    I’m new to this site, Your site is very informative.
    I have some queries.

    I want to know how much money i have to deposit in bank under any scheme so that my parents will get monthly income of Rs. 15000 including deduction in Tax.

    I want to give them a monthly income so that they can retire from work. Also they are not senior citizens and this will be their only source of income.

    Please suggest me how much amount i have to deposit, which bank and under which scheme…

    Expecting your reply…

    Thanks

  17. s sudarshana says:

    Bank has deducted income tax on accrued interest on my FD during FY 2011-12 thought the deposit is due for payment with interest in FY 2012-13. I would like to show the income Under “mercantileor cash” and not on accrued basis. I intend not showing any accrued interest during 2011-12 (FY), which will be shown in the year of receipt and use the TDS for computation of tax (to get refund) during 2011-12 FY. Is it allowed? I prefer to opt for ‘receipt’ basis as I have retired in April 2012 and my income has come down by about 50%!

    • admin says:

      Sudarshan Bank has to deduct TDS at the rate of 10% if interest on FD in year is more than 10,000. You also have to pay Tax on interest of FD as per your income slab. As your FD spans multiple financial years you can pay Tax each year on interest earned and claim TDS. It is possible to choose method of accounting but we are not sure of how TDS claim would work across Multiple financial years. Methods of Accounting throws some light on it.
      If you come across something please let us know.

  18. Ashish says:

    Hello sir,
    Bank has deducted TDS on FD but principal + interest will be paid to me in FY 12-13 as per schedule of FD.

    Shall I ask for the refund or there is any other process.
    Please help me out!

    Regards,
    Ashish

    • admin says:

      Ashish Bank has to deduct TDS at the rate of 10% if interest on FD in year is more than 10,000. You also have to pay Tax on interest of FD as per your income slab. As your FD spans multiple financial years you can pay Tax each year on interest earned and claim TDS. Methods of Accounting discusses it in detail.

  19. srikanth says:

    my bank has deducted TDS for Rs.1200 towards interest accrued on FD. the TDS is 10% only and 3% cess has not been deducted. since the interest is accrued and not paid does this TDS can be considered as advanced TAX. do i need to show this in my present IT returns or can I show it in next years returns when the interest amount is actually paid. if i need to show this amount in present year as 3% cess has not been deducted how should i account for it? can i pay it now? if so then who? pl help.
    thanks & regards

    • admin says:

      Your observation is correct, Bank just cuts TDS at 10% but does not cut 3% cess.
      Yes this tax can be claimed as TDS already deducted not as Advance tax( which is paid by individual before specified dates)
      You have an option of declaring interest based on what method of accounting you use-Cash or Mercenatile. FD spreading over the multiple financial years have been discussed in detail in Methods of accounting: Mercantile and Cash
      We suggest claiming TDS as reflected in Form26AS -easier to maintain.
      Coming to 3% Cess not deducted:
      Is 10% only TDS due to you. The interest on FD is based on your income slab. This is explained in detail in If TDS is cut you still may have tax liability in our article Basics of Income Tax Return.
      Whatever tax is due(if it is only 3% cess also) you need to pay it.

      • srikanth says:

        how to pay the cess amount? is it through challan 280? if so then which field i have to fill in it either tax or cess ?can i fill the balance cess amount in cess field and leave the tax field zero?

        • admin says:

          Srikant we are curious -only cess why do you need to pay?
          There is a row for paying cess so what you said is right. Fill Cess and leave tax field zero.

  20. K V rao says:

    What to do if the tds on bank interest is not reflected in 26AS of it department. My total tax deducted at source by the office is also not properly reflected in 26as. What is to be done?

    • admin says:

      Sir A question
      What do you mean by tds on bank interest ?
      Bank does not cut TDS on interest in saving bank account. or Recurring DepositBut bank deducts TDS for interest on Fixed Deposit.
      If TDS in Form 26AS does not match Form 16 given by your employer, please get it fixed by your office ASAP. Your office just has to revise return.
      Similar query discussed here
      SimpleTaxIndia has details about the Form26AS Mismatch. Please go through it.

  21. Nalini.R says:

    Sir,
    I earned about Rs 36000 through home tutions,Rs 9000 as part time lecturer,Rs26800 as interest from fixed deposit and Rs3626 as interest from savings bank during fin year 2011-2012.Have i to pay tax on my income please?
    Regards,
    Nalini.R

  22. MANEESH says:

    Sir,
    if a person’s source of income is only from fixed deposit done by him in the bank and he is not under the tax slab to pay the tax, and he had submit form 15H to the bank and bank had also not deducted any tax from him. Then is he had to submit tax return to IT department or not? Suppose his interest earned from bank is 20,000.00 in a financial year.

  23. Satender says:

    I have some queries.

    I have received form 16A from my bank stating the interest credited against the TAX SAVING FD as Rs. 13418/- with TDS deducted as Rs. 1342/-. I have to file my IT return now.
    a). Do I have to include this interest amount under Income from Other Sources?
    b). If I include this interest amount under Income from Other Sources, the Income Tax Payable is being calculated as Rs. 1422/-. Does that mean that I have to pay this as additional tax. FYI, I fall under 20% tax bracket for salaried male. And the income tax from salary has already been paid and matched.

    Awaiting earliest response so that I can go ahead with filing my IT Return.

    • admin says:

      Satendar answer to your queries
      a) Yes you have to include 13418 as Income from other sources.
      b)As you are in 20% slab you should be paying 20% of 13418 as tax = 2683.6
      c) TDS at 10% has already been deducted to you can claim the TDS of 1342 = 1342.6
      d) You have to pay tax on remaining amount i.e 1342.6 before you file Income tax return.

      Just a question How did you arrive at figure of 1422?
      Verify that TDS cut by bank is reflected in your Form 26AS.

      • Satender says:

        Thanks for your response. After entering the salary related information and taxes. I checked and validated the ITR-1 form (excel downloaded from Income Tax website) which matched. Then I went on to add the FD Interest as ncome from other sources and added TDS deducted in the TDS section and clicked on Calculate Tax button to get th value of 1422.

        • admin says:

          Thanks for the answer. Without more information it is difficult to say how it arrived at 1422.But if ITR Excel sheet says 1422 then please pay 1422 as income tax.

  24. Mahesh Hegde says:

    Dear sir
    I am an Agriculturist. My annual agriculture income is Rs.3,50,000 i dont pay tax since this is not liable to pay tax.
    This year May 2012 i have deposited Rs.3,00,000 as fixed deposit for 1 year at 9.5 percent. It will fetch Rs.30,000 as interest. I have given 15H to avoid TDS.
    Do i need to pay tax for this entire income? since i have both agriculture income as well as Fixed deposit interest income. What is my tax liability?

    • admin says:

      :
      As your non-agricultural income does not exceed the exemption limit , Rs 1,80,000 for AY 2012-13 you are not liable to pay any tax irrespective of amount of agricultural income.

      As I am not an expert in Income tax law, the suggestion is based on what I have read. Please do verify with an expert and if possible update us.

  25. Rosalee says:

    Hi. My parents hold a fixed deposit which is in both names – primary & secondary. Would the interest earned be shown as income for both (50% each) and tax filing done accordingly or should it be shown only for the primary holder?
    Thanks in advance

    • admin says:

      Rosalee a very good question.
      As you guessed rightly the primary account holder is responsible for interest earned through Fixed Deposit. Reason being he/she is one who had put money for the investment.
      But if the fixed deposit is opened by person with his money in name of his wife or a minor child as the primary holder then the interest would be added to income of the person who put the money. This is called Clubbing of Income.
      This article Clubbing of income might be of help to you.
      Please update us on whether clubbing of income applies in your case.

      • Rosalee says:

        Thanks. The source of funds is from sale of house. The house was in the name of my mother & she has paid the necessary LTCG taxes. However in the mentioned deposit, she is the second applicant. So would that imply that the interest earned should be shown as her income as per the Clubbing concept? Thanks in advance.

  26. prema rana says:

    i have a fd, on account of which rs 5000 has been deducted as tds now which itr(1, 2, 3,4) i should fill to get the refund. i have no other source of income.

    • admin says:

      ITR-1 Form is to be used by an individual whose total income for the assessment year includes:-
      (a) Income from Salary/ Pension; or
      (b) Income from One House Property (excluding cases where loss is brought forward from previous years); or
      (c) Income from Other Sources (Excluding Winning from Lottery and Income from Race Horses).

      So as your income is only for FD which comes from Income from Other Sources you need to fill ITR -1 form.

  27. Kavitha says:

    I want to show the interest earned out of my saving bank account while filing the returns. When I add this interest as other income and calculate the tax along with my salary, it is coming as I need to pay around Rs. 14000 tax. Now I am willing to pay this through challan 280 before 31st July and then file the returns. In this regarding, do I need to pay any interest amount on Rs. 14000. If so, how I need to calculate.

    As this income is of “interest on bank saving account”. I won’t be knowing the exact income till 31st of March, when I see the credit into my a/c. Doesn’t income tax interest really applicable? When I fill the same in ITR-1 (SAHAJ) and click on “calculate tax”, it is calculating some interest amount to be paid.

    Please clarify on this.

  28. Mrs. Inamdar says:

    Hello Sir,

    Actually my TDS is more than my tax payable amount, as I have flat registration after the investment submission in my organization.
    Now I am filling e-return. Which documents should I attach with the form to send to tax department.
    Only registration/stamp duty document or all the documents that i submitted to my employer also required to submit.

    Please advice me.

    Thanks in advance :)

    • admin says:

      Maam you do not need to submit any document while filing e-return , you just use it for filling. You might be required to show it if a discrepancy is noticed or case comes up for scrutiny. You need to keep documents for atleast 6 years.

      • Mrs. Inamdar says:

        Thanks Sir!
        You mean we just need to sent the “ITR-V” to income tax dept – Bengaluru.

        • admin says:

          If you e-File without digital signature, the duly signed ITR-V form is to be submitted to CPC Bengaluru using Ordinary Post or Speed Post within 120 days of transmitting the data electronically. This completes the Return filing process for non-digitally signed returns.
          Address of CPC is
          CPC Bangalore
          Post Bag No.1,
          Electronic City Post Office,
          Bengaluru, Karnataka-560100
          These instructions might be helpful

  29. Manju Patil says:

    Hi,

    My father is retired. He has only income from Fixed deposit.
    Bank has taken tax from him. He is a senior citizen. He didn’t submit 15H form and pan card with them.
    What document do i need to attach while reclaiming this tax.
    He is not come in any income tax slab and if the interest rate is greater than 10,000 still can bank cut TDS from his account?

    • admin says:

      Yes the bank is right in deducting the tax as interest was greater than 10,000 and your father had not submitted Form 15H and PAN Card.
      To reclaim the tax you need to file Income tax return . No document needs to be attached. I hope the bank has given you Form 16A for TDS.

      • Nitin Sood says:

        Sir / Madam,
        I also had the same problem. But my bank gave me Intrest Certificate only, which shows the intrest given to me by bank. In that case how to get refund from IT Dept. ?
        whether Bank can give Form 16A / TDS certificate as they had deducted 20% of intrest given without PAN number ?
        If not, Then How I can get my 20% TDS refunded as my income is lesser than 1.8 lac ?

        Now, I get the PAN Card, this problem is rectified by me.

        Regards,

        Nitin Sood

        • admin says:

          Based on our understanding
          Once the bank cuts the TDS amount, it’s not in bank’s hands to reverse as it’s the tax authorities who need to pay back.
          As tax has already been deducted and deposited by the bank, the only recourse for the assessee is to file a refund claim in Income Tax return.
          Similar query has been answered at CAClub

  30. Manju says:

    Hi,

    My father is retired. His only income come from Fixed deposit. He didn’t submit 15H form to the bank for the year 2011-2012. Bank has taken TDS 2479 from his account.
    What document do i need to attach while reclaiming tax amount? is it 15H form and pan card?
    Suppose interest is greater than 10,000 and his anual income doesn’t come in to income tax slab can bank still deduct TDS from his account? Please help.
    Thanks for information.

  31. sam says:

    thanks for being quite informative…plz answer my question.

    1.Does the pension earning by house wife come under subjection to income tax?

    2.IF the person has income from all sources near about 2.9 lakhs per annum , which shows he/she is subjected to income tax but at the same time having investments of 1 lac under various section for tax rebate…so ( 2.9 lac- 1 lac = 1.9 lac) which is tax free.so is it compulsory for him/her to file return?

    3.IF a person is having four FIXED DEPOSIT of 50,000/- each at the rate of 9% p.a in a same branch of bank under FLEXI SAVING A/C then individually he is not subjected to tax but overall will TDS applied to him?

    sir plz answer these questions of mine…i will be grateful to u….

    • admin says:

      Sam
      Pension is described in Section 60 and Section 11 of the Pension Act as a periodical allowance or stipend granted on account of past service, particular merits, etc. Pension received from a former employer is taxable as salary. As such the relevant provisions of TDS as specified in Section 192 and other relevant provisions are also applicable to pension income and tax is deductible on the same, as in the case of payment of salary.
      Article Income Tax on pension would be helpful to you.
      So in calculation of income tax use the pension like income from salary and calculate.
      Hence the various deductions will also apply.
      While calculating the exemption limit please include interest from the Fixed Deposit also.
      The exemption limit for SENIOR CITIZEN(Between 60 yrs to 80 yrs) is 250000 and For Very Senior Citizens(Above 80 years) is 500000 for Assessment Year 2012-13.

      We are not sure about FLEXI SAVING Account so please verify with the bank itself and update us if possible.

      • sam says:

        thankyou sir,

        what is the exemption limit for female below 55 years of age for this current year ending on march 2013?

        i didn’t got my answer sir..if a person comes under exemption limit after making investments of 1 lakh in lic,ppf and all.then at that tym does he /she has to file return n show that he is taxable but after making investments he got a rebate and now he is not taxable.

  32. Roy says:

    I have an FD with an NBFC and the yearly accrued interest income comes to about Rs 9761 as per 26AS form.. The NBFC deducted TDS as the amount is more than 5000. My questions are as follows:
    1. Since the interest is less than exemption limit of Rs 10000, Should I pay tax on this amount.If no, can I claim a refund on the TDS deducted by the NBFC.

    • admin says:

      For Fixed deposit with NBFC
      If the aggregate interest income that you are likely to earn for all your deposits is greater than Rs. 5,000/- in a financial year, you become liable for TDS, subject to submission of Form 15G for individuals and 15H for senior citizen
      TDS simply means Tax has been deducted at source.
      If your total income (after various exemptions and deductions) comes less than minimum exemption limit you can claim refund on TDS. Please see whether your income is less than minimum exemption limit if not then you might have to pay MORE tax as per the income slab

  33. Krishna says:

    Hi,

    Just a quick question….My account in a bank was created during my college days without PAN card. Last year, 20% TDS was deducted on my FD’s in the same bank though my income fall under 10% slab. I had submitted my PAN Card details now and received form 16(a) from the bank for that deduction. Now, Am I applicable for refund of over 10% TDS by including these details in Income Tax return.

    Appreciate your prompt response!!

    • admin says:

      krishna TDS is tax deducted by the bank and is paid to Central Govt. If your income is below the exemption limit then you can claim the TDS by including the details of TDS in income tax return.

  34. Surendranath says:

    Hi, I have gone through the blog and it is very informative. I have two questions :

    1. I have savings accounts in several banks and the total interest on them is coming to around Rs. 20,000. As TDS is not applicable on savings account, obviously their is no TDS deducted. I fall under 30% slab because of my salary. Now, I want to show this interest while filing of returns. Do I have to pay 30% of Rs. 20,000 as the tax ? if so under which challan I have to pay the same .

    2. I have couple of FDs spread across different financial years (sept 2011 till sept 2012). Now, while calculating for taxes, how do I know the accrued interest for the financial I am filing returns. From where can I get the required information?

    • admin says:

      Thanks for kind words. Coming to your questions
      1. Yes interest on Saving Bank account is taxable as per your income slab. Pay using challan 280 as it is for paying income tax.
      2. Bank deduct TDS on FD interest if FD interest in financial year is more than 10,000. If TDS is cut on the FD for the financial year bank should give you Form16A and it should be reflected in Form26AS.
      If interest in FY is less than 10,000 you have two options:
      1. Pay on maturity (called as cash accounting)
      or
      2. Calculate the interest yourself for every year and pay it every year. (called as mercantile accounting)
      This is explained in our article Methods of accounting: Mercantile and Cash

      Note: Next year i.e FY 2012-13 or AY 2013-14 No tax will be charged on interest earned on balance in savings bank account subject to a maximum of Rs. 10,000 per year.

      • Surendranath says:

        Thanks for the response. Another question in the similar lines …
        Myself and my wife have a savings account. I want to show the interest as other source of income while filing returns. Can I show all the interest income in my wife’s IT returns as she being a salaried and fall under 20% bracket and I fall under 30% bracket. Is this a legal procedure?

        • admin says:

          Surendranath interest for saving bank account will be added to income of the first holder of the account. If it’s your wife then she can claim it. As for income tax you and your wife are two separate entities and income tax will be taxed on income of each individual (with some exceptions like loan , gift etc)

  35. Umashankar says:

    Hi,
    You shared a very nice information. Most of my doubts got cleared. My income under Head salaries is 490000 and Fixed deposit interest is 21430 for which 2152 tax has been deducted at source by bank. In this regard i have 2 queries. Plz clarify
    1. Should i need to include 21430 as income from other sources or (21430-10000) = 11430?
    2. If i add 11430 or 21430, i am moving into slab 20% from 10% as total income > 500000. but the bank has deducted only 10% Tax. Should i need to pay the extra tax my own. If so, by what form (like for 280 or 282)

    Request you help in this regard so that i can file my returns

    • admin says:

      Umashankar
      1. You should include 21430 as the income from other sources.
      2.If you come into 20% slab you need to pay extra tax on your own as only 10% has been deducted. Use challan 280 to pay tax.
      Just clarify that you have done required deductions from salary. Ex under 80C your EPF contribution , your PPF contribution or under 80CCF is you bought infrastructure bonds etc so your net salary can be less than 490000.
      Check out the article
      Understanding Form 16: Part I , Understanding Form 16: Chapter VI-A Deductions
      Understanding Form 16: Tax on income

      • Umashankar says:

        Thanks for the promptly response. The income of 490000 whihc i mentioned is after deductions of around 78000 (EPF + VPF LIC) only. Since i was not knowing he interest on fixed deposits (since the intererst calculated is on accured interert in multiple deposits) i was not able to plan my savings. If i had know the bank interest earlier i should have saved more under 80C or 80CCF.

        Is there any way to find what can be the approx accured interest on my fixed deposits. To clarify on my fixed deposits, these deposits are created by bank automatically for 1 year leaving a min of 5000 Rs(I mean auto sweep facility)

        • admin says:

          No I don’t know of the way to find the approx. accrued interest? Is the TDS for FD part of auto sweep facility reflected in your Form 26AS?
          Of Which bank do you have auto sweep facility?

          • Umashankar says:

            Yes the bank issued 16A and it is reflected in 26AS..Auto sweep facility is with SBI

          • admin says:

            Thanks for answer.
            Is it the saving plus account? the reason for asking is the quantum of money put in FD. For example
            The minimum threshold you need to maintain in your savings plus account is Rs.5000. Above Rs.5000, starting from a minimum amount of Rs.10000 (and then in multiples of Rs.1000), all amount will be converted into a fixed deposit.

          • Paresh says:

            Best way is to ask bank about interest paid certificate for last financial year.One can not calculate it manually.banks can issue interest paid certificate on request of customer.

          • admin says:

            Welcome back Paresh and thanks for input. Some doubts
            1) What is interest paid certificate- Form 16A?
            2) When should one ask for certificate- after the end financial year?

          • Paresh says:

            Its not form 16A..16A carries details of tax deducted at source.
            Banks can issue interest paid or (added for cumulative type) certificate for deposits based on customer Id / Pan number….Just request the bank about it…

            Second question is not clear..We can demand it for any period like last financial year from 01st April 2011 – 31st march 2012.
            We can keep it for future reference as well.

          • admin says:

            What is the name of the certificate? Is it for interest on Fixed Deposit or for what purpose?
            My question was whether I can ask for interest one might get year in advance say for FY 2012-13 on Fixed Deposit provided I don’t break it. To help one plan tax saving

        • Paresh says:

          We require “interest income” of last financial year to show it as income from other sources while filing the returns.

          In one of the above comment, reader asked about calculating the interest for last financial year …. my opinion is that rather showing it something approximate,demand certificate from the bank.(Just I viewed my certificate and its tagged as Interest Paid certificate for the period ……)

          • Paresh says:

            I identify the confusion now.
            You are thinking about calculation of interest in ongoing year and about submission of 15G/H form.
            I was thinking about calculation of interest in last financial year to show it as income.

            I think I have misunderstood the discussion.

          • admin says:

            Bang on. Yes wanted to predict the interest for next year so one can make necessary investments now and save tax

          • Umashankar says:

            @ Admin :Yes it is savings plus account. anything above 5000 Rs will convert into FD for 1 year.

            @ Paresh : I want to know approx FD in advance so that i can plan my tax savings accordingly.

            Yesterday i found out a way for that. It is nothing but calculating the daily interest for each FD and multiple each FD with the no of days before taxation date (ie 31st march)

            Eg : a FD created on Sep 1 2012 with 100000 Rs @ 9% interest for 1 year. For each day accured interest is 2 Rs. The first taxation date is 31 mar 2013 ie 212 days from sep 1. So interest for 2012-13 is 5230 Rs and for next year will be 3797 rs (154 days from 31 mar 2013 to maturity date 1 sep 2013). Similarly cal for other Fd’s and add all of them.

            I have done the same for prev year and it was matching approx with the amount of TDS deducted …

          • admin says:

            Great Umashamker. I was planning to do same.

          • Umashankar says:

            Sorry mistake daily accured interest for above example is 25 Rs ..not 2 Rs..

          • Paresh says:

            Though I do not understand the issue clearly,my general opinion is that if any one is in taxable bracket then let get tax deducted at source…

          • admin says:

            I agree with you Paresh. But last year a friend of mine faced a problem the bank gave him Form 16A showing TDS but was not updated in Form 26AS till Feb 2012. He got letter asking to pay tax on TDS claimed.

          • admin says:

            Will check up with my bank HDFC

  36. Manoj says:

    Tax is deducted even if ur fds in diff branches of the same bank.Am i wrong?

    • admin says:

      As explained in the article:

        Tax liability for TDS is determined at branch level. One of easiest way adopted by many depositors is to spread their investments across various branches so that the interest earned in a particular branch is below Rs10,000 in a financial year.
        Tax liability is calculated on the first applicant’s name. Deposits held by minors are also subject to TDS. In this case the interest income will be clubbed under the income of the person in whose hands the minor’s income is included.

      So if you have spread your investments across different branches of the bank then TDS is deducted if interest for that fixed deposit whose interest exceeds Rs 10,000

  37. maneesh kumar says:

    I had 2 nos. Querry as stated below:
    1. I had earned 12000 interest on FD by bank. Bank had deducted TDS on FD as the interest exceeded 10000. While filing return should i had to show the interest earned as 12,000 or (12,000-10,000= 2,000)as upto 10,000 no tax is payable. Can i calculate tax on only 2,000 amount while declaring on filing income tax return.
    2. After death of my father the amount fixed in bank was transferred to my mother account. She is working women and liable for tax as per rule i.e. his income is above 1,90,000. She had transffered the whole amount of 6.00 lacs in the name of my sister for the purpose of her marriage. My sister is not in the slab of income tax as she is not working. My sister has valid PAN card.In this case what is tax liabilty toward my sister/mother.
    Thanking YOu.

    • admin says:

      Query 1:I had earned 12000 interest on FD by bank. Interest on 10,000 or 2000.Bank had deducted TDS on FD
      Entire amount of interest earned is taxable. So in your case tax will be applicable on Rs 12000.
      But as tax has been deducted, you can claim TDS in your calculations.

      As explained in my article Basics of Tax Deducted at Source or TDS
      The concept of TDS envisages the principle of pay as you earn. Tax must be deducted at the time of payment in cash or cheque or credit to the payee’s account and it’s Advantages are

      It facilitates sharing of responsibility of tax collection between the Deductor and the tax administration.
      It ensures regular inflow of cash resources to the Government.
      It acts as a powerful instrument to prevent tax evasion as well as expands the tax net.

    • admin says:

      Income of the deceased after his death is taxed in the hands of the legal heirs inheriting the respective assets. So your mother would be taxed and as she has transferred it to your sister , your sister would be taxed.
      But if your sister is an adult then the interest earned from the amount will be taxable only after it crosses the exemption limit (which in Assessment Year 2012-13 is Rs 1.9 lakh annual income.)
      If your sister is not an adult then her income would be clubbed with that of her mother.
      Please verify and if you could update us that would be helpful to other readers

  38. Nesha Dutta says:

    Very helpful information …….much appreciated One thing still not clear is the full deduction of the tax money from the FD – when I have submitted the required documents. Should I write the bank? I never filed income tax in India…is it possible to file the tax online.

    • admin says:

      Nesha the Interest on FD is taxed for NRE and TDS is at 30.9% . Due to DTAA TDS is lower than 30.9% but is not 0. Hence TDS of 8921 has been deducted. You can surely ask the bank.
      Yes you can file tax online. Please read the article on Economic Times : NRI liable to file tax.
      A suggestion, talk to your CA and get his suggestions for we don’t want to be penny wise and pound foolish.
      Please keep us updated

      • nesha says:

        Thanks for the information. Sorry, I am getting back late. It because I am still trying to find out what causes ICICI bank to deduct full tax amount even after submitting the DTAA forms and all – not to mention very disappointed with their customer service (I still don’t have answer). Anywhoo, based on my CA friend – I should transfer my NRO FD to NRE FD (i guess there is new law out there now which makes it possible for NRIs) by submitting couple of forms. I am visiting India towards end of the year; but my FD is not maturing until July 2013 – i guess i have to pay penalty if i choose to convert it to NRE FD (but probable less hassle compare to what I’m facing now). Can someone refer me a good bank for NRIs?

        Have a wonderful weekend everyone.

        Nesha.

        • admin says:

          Thanks for getting back Nesha.
          Benefit of DTAA can be availed only if NRI has submitted valid PAN details, proof of residency and other documents as prescribed within specified time. This link talks about, maybe it will help Tax-Declaration-Forms-for-NRO-Deposits

          Yes Interest on NRO deposit is taxable, Interest on NRE deposit & FCNR deposit are exempt

          As per RBI’s notification RBI/2011-12/536 dated May 7, 2012, NRIs are eligible to transfer funds from NRO account to NRE account within the overall ceiling of USD one million per financial year subject to payment of tax. This postRBI allows transfer from NRO to NRE account might be helpful.

          ICICIbank request letter to transfer from NRO to NRE can be found here (pdf file)

  39. Nesha Dutta says:

    Thanks much for this informative article. I have couple of questions – hope to get some help. I have a NRO Fixed Deposit a/c with ICICI Bank of Rs.300000 and I just received the TDS by mail showing Rs.8921.00 tax deduction for the period 01/01/2012 to 31/03/2012. Also I have submitted a copy of a form to avoid double deduction. I have no other FD or so with other banks – so no other income or source of income in India. At this point what should I do to get the money back or avoid further deduction .
    thanks again.

    Nesha

    • admin says:

      The interest on NRO account is fully taxable. Under the Income Tax Act, it is mandatory for the banks to apply TDS on NRO interest. TDS is applicable at 30.9 per cent on the entire NRO interest (without any threshold) and is is applicable on accrual basis on cumulative deposits. The post tax amount can be repatriated subject to a maximum limit of USD 1 million per financial year.Form 15-G (for non-senior citizens) or 15-H (for senior citizens), requesting for non-application of TDS is not available for NRIs.
      The TDS is not the same as your tax liability. This liability will be computed on the basis of the income tax rates which again depend upon your income and the exemptions, deductions and rebates you can claim. The TDS can be set off against your actual tax payable and pay only the difference. In case the TDS is higher than the tax liability, you will get a refund.
      Ref:moneycontrol:Shanbag

      • Nesha Dutta says:

        Thanks much for the quick response. I remember submitting a certification signed by a CA for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and on capital in June 2011 and it was accepted by the bank. Can someone explain that to me.

        Nesha

        • admin says:

          Thanks for information Nesha. This is specific case of Fixed Deposit of NRI where one can avail benefit of the lower TDS depending on the overseas country of resident popularly called as Double Taxation Avoidance Agreement (DTAA). DTAA is an agreement entered by India with various countries. NRI customers residing in countries that have signed DTAA with India will be eligible for a DTAA applicable rate of Lower TDS on the interest earned from the Term Deposits booked out of the funds remitted from overseas or from their NRE accounts.

          These lower TDS rates (lesser than 30.9%) for the respective countries are decided by Income tax authorities. E.g. for USA, the lower rate is 15%, for UAE it is 12.5% etc.
          In order to avail lower TDS, customers need to fulfill the following requirements:

          The customer should be a tax Non-Resident as per the Indian Income Tax Act.
          The customer should be a resident (tax resident) of the DTAA country and should be entitled to Treaty Benefits as per the criteria defined in the respective DTAA.
          The customer should be the beneficial owner of the funds and interest thereon.

          If one is desirous of availing the rate of deduction of tax as per the DTAA, the same will be applicable only on your submitting the relevant documents along with your PAN Number usually before beginning of financial year, every year. PAN updation is mandatory to avail of DTAA.
          One set of the below documents is required per Customer ID.

          DTAA Annexure – Declaration that the client was an NRI during the year in which tax is sort to be deducted & that he does not have any permanent establishment in India.
          Original or certified true copies of the ‘Tax Residency Certificate’ (TRC) from the income-tax authorities.TRC are issued by the tax/government authority of the country where the NRI resides. For tax residents of countries where there is no income tax, a “Self-declaration” shall be submitted by the depositor to the Branch.
          Self attested copy of passport & visa.
          For UAE and KUWAIT ONLY- photocopy of the passport pages which give the details of entry and exit.(to ascertain 183 days stay in a calendar year for UAE and 183 days in a financial year for Kuwait)

          If no certificate under DTAA is submitted by the depositor, then Income Tax at a rate of 30.90% will be deducted at source on interest earned in the NRO accounts/deposits irrespective of the amount of interest.

          Does this answer your question Nesha?

        • admin says:

          Nesha the icicibank link for NRO Fixed Deposit lists out all the details.
          Now coming to the question you had asked
          I have a NRO Fixed Deposit a/c with ICICI Bank of Rs.300000 and I just received the TDS by mail showing Rs.8921.00 tax deduction for the period 01/01/2012 to 31/03/2012. Also I have submitted a copy of a form to avoid double deduction. I have no other FD or so with other banks – so no other income or source of income in India. At this point what should I do to get the money back or avoid further deduction .
          thanks again.

          If the total income(including interest ) earned by you is below the exemption limit, you can claim refund from the I-T department by filing I-T returns.
          To avoid TDS, Being a non-resident, you cannot furnish declaration in Form 15G to the bank. You will have to obtain a certificate for non-deduction of tax at source by making an application in Form 13 with the jurisdictional tax officer. Such a certificate has to be then submitted with the bank.
          For more information you can read this link

  40. Paras says:

    I have a question regarding the way tax is calculated for the income from other sources, when a part of it is from F.D and tax has already been deducted for it:

    Please be a bit patient, as I have made it a long one to explain my point.
    An example that shows my current state:

    1. I am a salaried person, so my company deducts TDS on my income from salary.
    2. I have earned an interest amount of Rs. 72,000 from Savings account and Rs 28,000 from Fixed deposit accounts.
    3. Since all the F.Ds are in the same branch and the interest they earn is above Rs. 10,000, the bank has already deducted an amount of Rs. 2,800 towards tax on the interest of Rs 28,000.
    4. For this income from other sources, I would be falling within the 30% tax bracket.
    5. From what I understood from certain articles on the web, I should pay interest u/s 234 B and 234 C over the tax on this income – obviously after adding the education cess to it – (which I will have to pay all together with the “Self Assessment Tax” that I pay).
    I think, I need not pay the interest u/s 234 A (since I am paying within the due date of filing returns for the financial year 2011-2012 – i.e 31st July, 2012)

    I think, I have figured out the way to calculate the interest for the tax u/s 234 B and 234 C.
    What I don’t understand, is how should I adjust the TDS from the bank i.e Rs 2800 in this whole thing. Should I be paying interest u/s 234 B and C for the F.D interest? If yes, how can the TDS paid be adjusted there?

    Thanks a lot for reading this far. I am sure the answer to this would help a lot of people.
    Appreciate your efforts.

    • admin says:

      Thanks Paras for appreciating our efforts and details you provided for the question. There are two parts of the question
      1. Advance Tax.
      2. Adjusting for TDS

      Advance Tax is, as the name implies, is the tax that one pays in advance. Advance tax is the income tax that is payable if your tax liability exceeds Rs 10,000 and should be paid in the same year in which income is received. It is also called as “Pay as you Earn” scheme, since you pay the tax in the same year in which you earn income. You can read about Advance Tax and verify your understanding by reading our article Advance Tax:Details-What, How, Why.

      Second part: Adjusting for TDS
      Income tax assessment comprises of following stages:

      Computation of total income: Income from Salary + Income from House Property + Income from Profits and Gains of Business or Profession + Income from Capital Gains + Income from other Sources
      Deducting valid deductions :One can reduce the income if one invests in legal tax deductions such as 80C, 80DD.
      Determination of the tax payable thereon : Calculate the total tax you are required to pay. Deduct TDS and see if there is some balance that you need to pay. Ex: Your tax requirements comes out to be 40000(from the salary) + 8400 (from the FD. Note Interest on FD is taxed at 30%). As TDS has been paid fully by your company based on your income slab So 40,000 is accounted for. But Bank has only deducted 2800 (10%) and not 8400. So you need to pay balance: 56 (8400-2800) . As this is less than 10,000 you don’t need to pay Advance Tax. You only need to pay balance tax
      Please verify the TDS deducted with Form 26AS

      Paying the tax : Pay 5600 in Self Assessment Tax
      Filling Income Tax Return Form.

      These steps are described in detail in our article Income Tax Overview.
      Please let us know if it’s clear or you need more clarification.

  41. rosy says:

    Hi
    I have a query…I wanted to know that i have various FDs in a bank and my interest income is more than 10,000 yearly.So in that case will the TDS be deducted from my a/c. inspite that i have filled Form H15g declaring that i am a housewife and i do not have any other income other than this.I even don’t have a PAN card which i declared at the time of opening the a/c. PLEASE GUIDE ME….

    • admin says:

      Rosy the bank would be deducting TDS at the rate of 20% as you have not provided the PAN if TDS is to be deducted.
      And 15G Form will be not be applicable.
      Whether interest in your FD in a branch of the bank exceeds Rs 10,000 is what you have to look. Note it is limit of 10,000 is on branch of the bank and not all FDs together. That is the reason people split up the FDs in different banks.
      Please visit your bank and they would provide you with details. Please let us know too for our readers will benefit.

    • admin says:

      As a follow up Rosy asked the question by sending an email:
      Please ask questions on the blog itself – it would benefit all readers.
      Are the FDs clubbed together from all the branches of the same bank????And also that from different banks?????There is a myth that though everything is online nowadays so u cannot maoke FDs in different banks…please guide.

      Our response:
      Rosy the bank would be deducting TDS at the rate of 20% as you have not provided the PAN if TDS is to be deducted.
      And 15G Form will be not be applicable.
      Whether interest in your FD in a branch of the bank exceeds Rs 10,000 is what you have to look. Note it is limit of 10,000 is on branch of the bank and not all FDs together. That is the reason people split up the FDs in different banks.
      Please visit your bank and they would provide you with details. Please let us know too for our readers will benefit.

  42. Abhishek says:

    Dear Sir/Madam,

    I request your advice on the below case:

    I am earning Rs. 9,000 from my FD at a bank in a financial year. In the same period I earn interest amount of Rs. 1,800 from my saving A/c and Rs. 1200 from RD account in the same branch.
    Will the TDS be deducted by bank on my interest amount in this situation? If yes, how much amount will get deducted provided they have my PAN number.

    Thanks,
    Abhishek Dixit

  43. Abhishek says:

    Dear Sir,

    I request your advice on the below case:

    Suppose I am earning Rs. 9,000 from my FD at a bank in a financial year. In the same period I earn interest amount of Rs. 1,800 from my saving A/c and Rs. 1200 from RD account in the same branch.
    Will the TDS be deducted by bank on my interest amount in this situation? If yes, how much amount will get deducted provided they have my PAN number.

    Thanks,
    Abhishek Dixit

    • admin says:

      Thanks for the question it made dig a little more on the subject. Some clarifications:
      1. No TDS is deduced for Saving bank account
      2. No TDS is deducted for RD
      3. TDS is deducted for Fixed Deposit if interest acrrued or paid exceeds Rs 10,000.
      Ref:CAClub:Matter of Interest,
      ICICIBank:Recurring Deposit FAQ
      For Financial year FY2011-12 or assessment year 2012-13 interest on all the deposit accounts (Saving Bank Account, RD, FD) is taxable as per your income slab.
      So bank should not deduct TDS for you. You can check TDS from Form 26AS
      Please let us know us about your case, our readers and us would appreciate it.

      • Abhishek says:

        Hi,

        Thanks for your reply. I agree that no TDS will be applicable on saving and RD accounts. Also, interest in my FD is not exceeding Rs. 10,000 so TDS should not be deducted from it.
        But, my cumulative interest from all the accounts (FD+Saving+RD)is exceeding 10,000. So will the bank deduct TDS on my FD interest i.e. Rs. 10%of Rs. 9000= Rs. 900? Or they will consider that interest from FD is below 10,000 (ignoring interest earned through saving a/c and RD), so NO Tds will deducted at all?
        Please Advise… Many Thanks in Advance!!

        • admin says:

          Abhishek,
          As mentioned earlier Bank does not deduct TDS on RD or Saving Bank account – though interest is taxable at your income slab as it comes under Income from other sources.
          As your FD interest is less than 10,000 bank should also NOT deduct TDS for FD.
          So for you no TDS should be deducted.
          Please check Form 26AS and verify.
          We would appreciate if you share your findings(TDS deducted or not) with our readers.

    • admin says:

      Abhishek TDS will be deducted at the rate of 10% provided they have your PAN number-else 20%

  44. [...] by the bank if interest income is greater than Rs 10,000 in a financial year as discussed in Fixed Deposits and Tax. The interest in various quarters are given below using Rupeetimes: Calculator on Fixed [...]

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  46. Paresh says:

    Regarding Tax saver fixed deposits,one can choose from cumulative,quarterly interest payout,Half-Yearly/annual interest payout option…One need to choose the option at the time of submitting the fixed deposit request…it can not be changed afterwards.
    Unlike NSC,Interest reinvested in cumulative option do not qualify for 80C benefits…so one can choose to take out interest if sole purpose is to save tax.

  47. [...] all your deposits held in a branch is greater than Rs 10,000 in a financial year. In our article Fixed Deposits and Tax we looked at Taxation aspect of Fixed Deposits. We saw that we can avoid getting TDS cut(not avoid [...]

  48. Umesh says:

    Thanks for the reply.

    But my query remained unanswered. I know that the gift to parents, major son and daughter, brother and sister are not taxed.

    My query was not about the gift but about the income that was generated by investing the amount received as a gift, from above mentioned relatives, in FD or any other financial instrument(s). (as pointed by you in your article)

    I know in case of spouse, minor children, son’s wife it is clubbed with the income of the donor but what about others. (even the taxguru articles mentions about spouse, minors etc. only and not about others)

    Thanks

    • admin says:

      Sorry Umesh I went off the tangent. Let me make another attempt in answering the question:

      As per the current laws, any gift received in cash or kind exceeding Rs 50,000 is taxed in the hands of the recipient as “income from other sources”. However, this rule does not apply to gifts received from relatives. Additionally, any gift received on the occasion of your marriage, under a will or inheritance is not taxed in your hands.
      Relatives, for the purpose of taxation, include spouse of the individual, siblings, brothers and sisters of the spouse, brothers and sisters of the parents, and any lineal ascendant or descendant of the individual or the spouse,

      Though there is no tax on gifts, all gifts in excess of Rs 50,000 (other than those from relatives) and income generated through them get clubbed with the recipient’s taxable income. However, income earned by assets gifted to minor children, spouse and son’s spouse are included in the income of the donor for taxation.

      It is pertinent to note that while there is no tax on gifts under given circumstances, the revenue authorities will be within its powers to treat even such unexplained or unproved gifts as cash credits. It would, therefore, be prudent to maintain documentary evidence (such as a gift deed/letter of understanding) in respect of gifts received, to avoid any dispute with the revenue authorities at a later stage. This is particularly relevant in cases where the gift amount is substantial and also where it is received from relatives.

      Hope it explains. I would suggest talk to your CA or tax consultant if the amount is big for at times we are penny wise and pound foolish.

      • Umesh says:

        Thanks for the reply but again you discussed more on taxation on gift rather than taxation on income generated from gifts.

        Anyway I posted my query to a blog and the answer was, it will be clubbed. I have posted a counter question, will let you know the answer, if it is replied.

        But my logic is, nowhere, in any article or review or blog etc., I found that the income generated from gift by relatives is clubbed with donor, except in case of income from gifts to minor child(ren), spouse and son’s wife. And if clubbing of income is a possibility, then why only these specific relations are mentioned everywhere, why not others or to say every relation.

        I also contacted a CA and his reply was that income will not be clubbed provided it is by cheque/draft and supported with document like gift deed.

        I do not know how much amount is big or substantial whether 10K, 100K or 1000K

  49. Umesh says:

    Another excellent article by you. Your series of articles on Fixed Deposit is marvelous.

    I have a query.

    In the paragraph Some points to note for Fixed Deposits:

    You wrote:

    “Investors often book fixed deposits in the name of non-earning family members such as spouse. The rule is ……….. when income tax is calculated, it will have to paid by the donor or earning member.”

    You cited the example of spouse. How about if the gift is made to (all non earning family members or earning but total income is less than exemption limit)father, mother and also to brother, sister, son and daughter (not minor)and invested in FD or any other financial instrument(s).

    Thanks

    • admin says:

      Umesh thanks for encouraging words. A very good point raised about taxability of gift. It is a very detailed topic but in nutshell.

      Under the Income Tax Act a person has to pay taxes on his income. A person cannot transfer his income or an asset which is his one of source of his income to some other person. If he do so the income shown to be earned by any other person is included in the assessee’s total income and the assessee has to pay tax on it.
      TaxGuru article Clubbing of income discusses it in detail.
      Yes you are right gift to parents, major son and daughter , brother and sister are not taxed,
      As per the provisions of the I-T Act, 1961 (the Act), any sum of money received by an individual or a Hindu undivided family in a particular financial year, without consideration, the aggregate value of which exceeds Rs 50,000 is taxable.
      Exemption is:Gifts received from any relative, as defined under the Act, is not taxable. Relatives include spouse of the individual; brother or sister of the individual; brother or sister of the spouse of the individual; brother or sister of either of the parents of the individual; any lineal ascendant or descendant of the individual; any lineal ascendant or descendant of the spouse of the individual; and the spouse of the person referred to as aforesaid.

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