Tax On FD Interest: You have to pay tax on the interest you earn on a bank’s fixed deposit (Bank FD). It is taxed as ‘income from other sources’.
New Delhi: Tax On FD Interest: You have to pay tax on the interest you earn on a bank’s fixed deposit (Bank FD). It is taxed as ‘income from other sources’. But it has been seen that many times taxpayers make mistakes in giving information about interest income on FD, due to which they get notice of income tax department.
This happens because the income tax data that the Income Tax Department has, does not match the ITR filed by the taxpayer. So let us tell you in the easy language that you should not get income tax notice on the interest received on FD, so what precautions should you take for this.
Tax on FD interest
First of all, understand that you have to pay tax on whatever interest is received on the bank FD. However, senior citizens can claim up to Rs 50,000 on the interest earned on savings and fixed deposits. In ITR, you have been given the Income from other sources “column. This is where you have to write the income from your interest.
TDS deducts bank interest on FD
If in the year you have earned more interest than a fixed limit, then the bank deducts TDS on it by 10 percent. This limit is Rs 40,000 for the general public, while Rs 50,000 for senior citizens. If the interest earned in the year is more than the limit, then the bank will deduct TDS, which will be seen in 26AS. This will also prevent mismatch in the data of ITR and Tax Department.
Relief to Senior Citizens
In the case of senior citizens over 60 years of age, savings account, FD / TD, post office schemes, any type of deposit made in co-operative banks, interest up to Rs 50000 in a financial year is subject to income tax law. Tax free under section 80TTB. One interesting thing to know is that TDS is not deducted on interest income from FD of post office.
Do this to avoid TDS
If your income is less than the tax limit, then you will have to inform the bank immediately about this to avoid deducting TDS. For not cutting the bank TDS, senior citizens have to submit form 15H to the bank. While those who are not senior citizens, they have to submit Form 15G. These forms are for the declaration that the annual income of a person does not exceed the minimum exemption limit fixed in a financial year. In order to not deduct tax, these forms have to be submitted every year at the beginning of the financial year.
This is how to avoid income tax notice
The FD investor has the option to show the receipt of interest in the ITR in the year of receipt as well as the year of receipt. That is, you can give interest details every year or you can give that year also when you get FD interest. But experts believe that if you give information about interest income in the year of accrual itself, it would be better.