Fixed Deposits, or FDs, have remained one of the most popular investment avenues for those interested in risk-averse schemes. All you do is deposit a lump sum amount and accrue interest based on the rate at which you book the FD.
However, the returns that you earn on FD investment are subject to certain taxation. Before investing in these schemes, you must be aware of the tax implications on the interest you earn. For instance, FD issuers deduct TDS before paying the interest.
This can help you invest in a more informed manner and maximise your returns while complying with tax rules. To know more about TDS on FD interest, rates, exceptions, and more, read on.
Fixed Deposits are the preferred form of long-term investment but are subject to a tax deduction, which can impact the returns you get. As such, knowing the rate at which FD issuers calculate TDS on FD is crucial.
The rate of this deduction depends on the type of deposit you choose. The table below denotes the various types of fixed deposits available and the tax rates that follow:
Type of FD |
TDS Rate |
Resident Indian FD Account |
10% |
Non-Resident Ordinary FD Account |
30% |
Non-Resident External FD Account |
0% |
Foreign Currency Non-Resident |
0% |
Time Deposit (Post Office) |
10% |
TDS makes the taxation process simpler since the deduction is at the source by the FD issuer. However, there are certain rules, exceptions, and conditions related to the deduction of TDS on FD interest for individuals and other investors.
TDS, like GST, has a systematic tax structure based on the amount you earn as interest. Here are the particulars:
Particulars |
Tax Rate and Rules |
Interest Income |
Bank FD: TDS of 10% if the annual income from FD interest exceeds ₹40,000 for regular citizens TDS of 10% if the yearly income generated through FD investment is more than ₹50,000 for senior citizens
NBFC FD: TDS of 10% if the annual income from FD interest exceeds ₹5,000
TDS of 20% if the interest earned exceeds the threshold limit and you have failed to share PAN details with the NBFC
|
Documentation (PAN Details) |
If you have not provided your PAN details, the tax rate levied is higher, i.e., 20% |
Residence Status |
Non-resident Indians may also have to pay other surcharges and cess tax |
Joint Ownership of Account |
The primary account holder needs to furnish their PAN details in case of a joint FD account The secondary account holder is liable to pay taxes on joint FD account returns. |
The TDS on fixed deposit interest is deducted by the issuer, i.e., banks or NBFCs, at the time of interest payout. These deductions are made to your FD returns, irrespective of whether you have opted for cumulative or non-cumulative FDs.
The TDS waiver is meant for those that have income under taxable brackets. There are two types of waivers in place that can be availed through two different forms, Form 15G and Form 15H. Both of these provide waivers to specific groups as listed below:
Form Type |
Group Who Can Avail of a Waiver |
Form 15G |
Individuals who have earned income under the taxable income threshold |
Form 15H |
Senior citizens whose income is under the taxable limit |
It is crucial to remember that forms 15G and 15H are only applicable to Indian residents. Additionally, until March 31, 2023, NRIs were allowed to file Form 10F if they did not have a PAN to avoid additional TDS.
If you are looking to apply for a TDS waiver, follow the simple steps mentioned below:
Visit the bank where you have the FD account. Meet the branch operations manager or the branch manager and ask for the applicable form, 15G or 15H. Fill in all the details and attach all the physical verification documents, such as your PAN card copy.
Then get it approved and ratified by the bank. This process may take a couple of days.
With India going digital, several financial institutions have begun making the process of filing for a waiver fully online. For such an online process, you can follow the simple steps mentioned below:
Log in with your username and password
Search for the Tax section and select Tax Deductions or TDS from the list of options
Select the relevant form, either Form 15G or Form 15H, from the options and fill it
eSign and submit necessary documents
Download and save the acknowledgement slip once completed
Depending on the FD issuer, the steps that you will have to follow may differ.
TDS on FD interest, as its name suggests, is deducted by the financial institution at the source of payment. This eases the burden of tax payment and hence, you do not have to follow any process to pay the tax deducted at source on your fixed deposit.
In case the tax deducted at the source is more than it should be, you can claim a refund for it. To claim a TDS refund, you need to follow these simple steps:
Open your web-based device and go to the website of the Income Tax Department website
Login to your account using the credentials
Choose and file the relevant ITR form
Submit the form and e-verify it to claim your refund
Other FD Related Pages |
||
TDS is the tax deduction at the source of payment. In other words, the end customer doesn’t need to pay this tax, as it is paid by the financial intermediary that pays the amount. It is levied in various transactions in accordance with the Income Tax Act.
TDS is applicable when your interest from fixed deposit exceeds the threshold limit. The limit for the same is ₹40,000 for non-senior citizens and ₹50,000 for senior citizens.
Tax Deducted at Source applies on fixed deposits offered by banks and NBFCs. However, the threshold limit for TDS on the interest income varies depending on the type of FD, i.e., bank FD or NBFC FD and the age group the individual falls into.
For Bank FDs, the threshold limit for tax on interest earnings is set at ₹40,000 for citizens under the age of 60 and up to ₹50,000 for senior citizens, i.e., citizens over 60. The TDS on FD interest is deducted at 10%.
As for NBFC FDs, the threshold limit for tax on interest income is ₹5,000. TDS is deducted at 10% if the earnings exceed ₹5,000. Furthermore, failing to share the Permanent Account Number (PAN) details and exceeding the threshold in interest earnings will attract a TDS of 20% on the interest earned.
Any resident of India with a PAN card can apply for a TDS waiver, provided their annual income is under the taxable limit. If you meet the set criteria, you can get a waiver on TDS on fixed deposits by filling up and submitting forms 15G (if non-senior citizens) or 15H (if senior citizens). This process can take a few days.
Until March 31, 2023, NRIs could submit Form 10F to avoid TDS without a PAN. You can get in touch with your bank for more details on waivers and exemptions.
As per the current TDS deduction on the bank fixed deposit limit, interest-earning of ₹10,000 is not subject to tax deduction at source since it is under ₹40,000.
However, if the interest is from other sources, the TDS rate will vary based on the earning source (lottery, security investment, dividends, etc).
You can get a waiver on the TDS if you meet the eligibility criteria of having annual income under the taxable limit.
NRIs or non-resident Indians pay a higher rate of TDS on FD interest, 30% plus cess and surcharge.
TDS doesn’t need to be filed online or offline. You may, however, visit the official income tax homage to know about this process in detail.
NRIs or non-resident Indians pay a higher rate of TDS on FD interest, 30% plus cess and surcharge.