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Updated January 15th, 2024 at 12:19 IST

Tax savvy moves: What you need to know about FD TDS rates

Banks offer FDs with fixed rates and tax-saving options for a 5-year tenure, allowing up to Rs 150,000 annual deduction under Section 80C.

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FD (Representative)
FD (Representative) | Image:Freepik
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Tax-saving deposits: Investors often turn to Fixed Deposits (FDs) for their lower risk and guaranteed returns, a popular choice amongst taxpayers. Banks provide FDs with fixed interest rates, and there are tax-saving FDs with a minimum 5-year tenure, allowing for an annual deduction of up to Rs 150,000 under Section 80C of the Income-tax Act, 1961.

When opting for FDs, individuals can choose the interest payment mode, whether it's monthly, quarterly, annually, or reinvestment of interest with the principal amount. It's crucial to be aware of the tax implications related to the interest earned on FDs. If the annual interest exceeds Rs 40,000 (Rs 50,000 for senior citizens), the bank enforces a 10 per cent Tax Deduction at Source (TDS) under section 194A of the Act.

In cases where PAN is not provided by the deductee, the TDS rate is increased to 20 per cent. For non-residents, TDS is at a flat rate of 30 per cent plus health and education cess at 4 per cent. During tax return filing, individuals must declare FD interest as taxable income and can claim credit for TDS against their total tax liability.

TDS check: Dual methods

Verification of TDS can be conducted through two methods.

Form 16A issued by the bank

Form 16A, a quarterly certificate, succinctly details deductor and deductee information, including PAN/TAN details, interest paid, and TDS deposited with the government. Issued promptly within 15 days of TDS return filing due dates, it provides a concise snapshot of financial transactions.

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Form 26AS

Accessible through both the TRACES portal and downloadable from the income tax e-filing portal, Form 26AS stands as a comprehensive statement containing vital tax-related details. This statement serves to confirm the taxes withheld on Fixed Deposit (FD) interest, presenting individuals with a holistic view of their tax-related information. 

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Individuals with income below the taxable limit can seek a waiver of TDS on FD interest by submitting Form 15G (15H for senior citizens) at the beginning of the financial year.

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Published January 10th, 2024 at 18:28 IST

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