Fixed deposits have long been preferred investment options for senior citizens in India. They offer guaranteed returns in the form of interest, which is best suited for the low risk profile of retired investors. Furthermore, fixed deposits also offer the option to receive regular interest payouts, which can supplement or act as pension for senior citizens.
That said, the interest earned on such fixed deposits may be subject to tax deducted at source (TDS). TDS on fixed deposits for senior citizens is only levied if the interest exceeds ₹50,000 in a financial year.
If you are a senior citizen who has invested in an FD (or is planning to do so), you should know that TDS deduction on FDs for senior citizens is only done because the income is taxable as per the Income Tax Act, 1961. As a matter of fact, this income is taxable at the income tax slab rate applicable to you.
Here is a closer look at some of the important points to remember about TDS on fixed deposit for senior citizens.
All the individual residents who are 60 years of age or above qualify as senior citizens in the case of fixed deposit investments.
As per section 194A of the Income Tax Act, 1961, in the case of deposits held by senior citizens, TDS on FD cannot be deducted if the earnings do not exceed ₹50,000 during the financial year.
The TDS on fixed deposits for senior citizens is deducted at the time of credit of interest and not upon the maturity of FD. So, if you have an FD investment for 3 years, the TDS on FD interest will be deducted at the end of each year.
The rate of tax deduction for resident Indians is 10% (or 20% if you have not provided the PAN).
In case of non-resident Indians, the rate of TDS on fixed deposits for senior citizens is 30%.
The Government of India provides benefits for senior citizens while filing their ITRs too. In addition to the above pointers about TDS on fixed deposits for senior citizens, you should also know the following important details about Income Tax Return (ITR) filing.
As per the old tax regime, the basic exemption limit for senior citizens (aged 60 years but below 80 years) is set at ₹3,00,000 and for super senior citizens (aged 80 years and above) at ₹5,00,000.
You need not file ITRs if your income is below the basic exemption limit.
As per section 194P of the Income Tax Act, 1961, if you are a resident senior citizen above 75 years of age, you will be exempt from filing ITRs if you only have pension and interest as a source of income.
To get the benefits of section 194P of the Income Tax Act, 1961, you need to submit Form 12BBA with the banks in which you have fixed deposits. The form contains details such as the following:
Tax deductions to be claimed under sections from 80C to 80U
Tax rebate claimed under section 87A
The total income from pension and interest
By filing this form, not only can you avoid the hassle of tax deduction, but you also do not have to wait around for an income tax refund.
It is important to know about TDS on fixed deposit interest for senior citizens if you are over 60 years and wish to invest in an FD. The details given above should help you understand what this tax is and how it works.
No, tax is deducted on fixed deposits for senior citizens only if the total interest earned during a year exceeds ₹50,000.
The rate of tax deduction at source on FD interest for resident senior citizens is 10%. However, if you have not provided your PAN, the TDS rate is 30%. For NRIs, tax is deducted at 30%.
Yes, if your overall tax liability for the year is zero, you can claim a refund of the tax deducted while filing your Income Tax Return.
In case your total income during the financial year does not exceed the basic exemption limit, you can submit 15H with the bank or NBFC to avoid tax deduction at source. This will help you avoid the hassle of claiming a refund.