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We have got many queries on fixed deposit and request on writing about fixed deposit only from perspective of income tax return. So we made an video to answers  questions: Is Fixed Deposit interest taxed? Is TDS deducted? Do I need to pay tax if TDS is deducted? Can we avoid TDS by filling Form 15G/15H .How to show interest,TDS in Income tax return? How to claim refund if tax has been deducted?

Video on Fixed Deposit , Interest , TDS, Tax,Income Tax Return, Refund

On YouTube our video for FD, Interest, TDS , ITR and Refund . In 9:30 mins it covers Fixed Deposit,.How to show interest,TDS in Income tax return? How to claim refund if tax has been deducted?

Overview of Video

What is FD?

Fixed Deposit(FD) is an investment product which allows you to invest a sum of money for a fixed time period and at a fixed rate of interest. During the course of the FD, even if the prevailing interest rates go up or down, you will be entitled to the rate of interest that was promised to you when you first made the deposit. You can deposit money for as short a period as 7 days and upto 10 years. Interest will be paid at the rate applicable on the date of deposit, for the period for which the deposit has remained with the Bank. It is known as Term Deposit in Canada, Australia, New Zealand, Certificates of Deposit in United States and Bond in United Kingdom.

What is Tax on Fixed Deposit

Interest that is earned on fixed deposits is taxable in the hands of the depositor as per the income slab. For FY 2014-15 a person who earns income between 2.5 lakh to 5 lakh pays only 10% tax on it while person who earns above 10 lakh pays 30% tax.

For example :FD for an year for 1,00,000 at interest rate of 8% so Interest earned is 8244 Rs

For one who falls in 10% income slab tax is Rs 824.40 (10% of 8244) For one who falls in 20% income slab tax is Rs 1648.8 (20% of 8244) For one who falls in 30% income slab tax is Rs 2473.2 (30% of 8244)

When is TDS applicable on FD ?

If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 10,000 in a financial year, TDS will be deducted 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.

For example if Joy starts at FD of 1 lakh (1,00,000) at 10% interest on 1 Aug for 3 years on 1 Aug 2013. His FD will mature on 1 Aug 2016 and he will get 1,34,505. Interest earned over various years and TDS is shown in picture

Interest and TDS on FD

Interest and TDS on FD

TDS and PAN

Tax liability is calculated on the first applicant’s name. The second or joint holder has no tax liability. TDS is tied to PAN number of first holder if Wife is First holder of FD then TDS would be against her PAN number. Our article Fixed Deposit in Name of Wife: Clubbing,Tax,TDS, ITR,Refund covers it in detail.

Rate of TDS

  • TDS is deducted at the rate of 10% if PAN submitted
  • If PAN is not submitted TDS is deducted at the rate of 20%.
  • No education cess is added to TDS. So even if TDS is deducted you still end up paying self assessment tax

How can one Avoid TDS ?

Avoid TDS (not Tax) by submitting at beginning of every Financial Year Form 15G for Non Senior Citizens Form 15H for Senior Citizens A false or wrong declaration in Form 15G attracts penalty under Section 277 of the Income Tax Act. Our article Avoid TDS : Form 15G or Form 15H covers it in detail

Conditions for filing 15G:

  • Form 15G is for Indian residents below 60 years of age, HUFs and trusts
  • The final tax on estimated total income computed as per the Income Tax Act should be nil(0)
  • The sum of the interest (excluding interest earned on securities) received during the financial year should not exceed the basic exemption slab which is of Rs 2.5 lakh in FY 2014-15/FY 2015-16

Conditions for Filing 15H :

  • Form 15H can be only filed by individuals above 60.
  • This form imposes only one condition–the final tax on the investor’s estimated total income should be nil.
  • So, if you are above 60, your taxable income for the financial year can be up to Rs 3 lakh for you to be eligible for 15H. For super senior citizens above 80 years, this limit is Rs 5 lakh
Who can fill Form 15 G Form 15H to avoid TDS

Eligibility for Form 15G 15H

What if Form 16A?

A  consolidated TDS Certificate, Form 16A, for TDS deducted during a financial year will be issued  by the Bank if TDS is deducted.

What is Form 26AS? How to verify whether tax was deducted or not?

Verify TDS: Form 26AS TDS deducted comes up in your Form 26AS which tied to your PAN number. Details in it should match the Form 16A provided by bank to you. Click on image to Enlarge. Our article What to Verify in Form 26AS covers it in detail

Verify if TDS details in Form 16A matches those in Form 26AS

Verify if TDS details in Form 16A matches those in Form 26AS

How to show interest from FD in ITR?

Interest: Income from Other Sources Interest on Fixed Deposit needs to be shown as Interest Income in Income from other Sources. Our article Income From Other Sources :Saving Bank Account, Fixed Deposit,RD and ITR covers it in detail.

In ITR2 it is to be filled in Schedule OS or Income from other sources under Interest Gross

In ITR1 it is shown in one column along with any other income you may have

Interest on FD should be shown in Schedule OS, Income from Other sources, as Interest Gross

Interest on FD should be shown in Schedule OS, Income from Other sources, as Interest Gross

FD income in ITR1

FD income in ITR1

How to show TDS on FD in ITR?

If TDS is deducted you need to show it in ITR in TDS section.

Filling TDS Information from Form16A

Filling TDS Information from Form16A

Tax payable or refund?

After entering ALL your other Income and tax details, Calculate your Tax Liability . When you file your Income tax return net tax payble by you to Govt should be 0.

  • If Tax is payable then you need to Pay Self Assessment Tax
  • If you have paid more tax you can ask for Refund
Tax Liability : Is tax payable?

Tax Liability : Is tax payable?

If tax is payable then?

If tax is payable Pay Self Assessment tax by using Challan 280. Our article How to pay Challan 280 online? explains the process in detail.

Enter Self Assessment Details in ITR. After entering ALL your other Tax details your net tax payable should be 0

Filling Details of Advance of Self Assessment Tax after paying Challan 280

Filling Details of Advance of Self Assessment Tax after paying Challan 280

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