If you deposit money in the bank’s FD, recurring deposit or company deposit, then the interest received from them is taxed. Banks or companies deduct tax only while paying interest. This is called tax deduction at source i.e. TDS. You can adjust this amount of TDS later on filing the income tax return.
You can avoid paying TDS on fixed income investment. Know how
The institute will deduct TDS only when the interest income is more than a limit. If your interest income is more than Rs 10,000 annually, then the bank will deduct 10% TDS on the entire interest amount. Many times there can be more than one deposit in different branches of the same bank. In such cases interest amount is added to TDS. The TDS limit for interest income from company deposits is Rs 5,000.
What has changed in the rule?
From April 1, 2018, the new section 80 TTB has been added to the Income Tax Act, 1961. It gives the benefit of deduction up to Rs 50,000 on the interest income from their deposits to senior citizens. This means that up to Rs 50,000 from interest will not be taxed.
However, deduction under section 80 TTA is not available in these cases. Section 80 TTA gives the benefit of deduction of Rs. 10,000 on interest income from deposits in savings accounts in bank and post office. This means that TDS will be applicable only if the income from interest exceeds Rs 50,000 in any one financial year.
How to save TDS
You can submit Form 15G or 15H to avoid TDS on interest income. Form 15G is for people below 60 years. While Form 15H is for those whose age is more than 60 years.
You can submit these forms only when the tax on the total income is zero. Also, the interest received during the financial year should not be more than the slab of the rebate. There is a tax exemption of Rs 3 lakh for Senior Citizen, Rs 5 lakh for Super Senior Citizen and up to Rs 2.5 lakh for others. Form 15G or 15H should be submitted at the beginning of the financial year.
Penalty will be levied for giving incorrect information
If you submit these forms in the bank despite not being eligible, then penalty can be incurred. There is a provision of jail for 6 months to 7 years. The eligibility conditions are given in the table below.
You can also file online
You can also submit these forms online instead of submitting them to the bank branch. Check with your bank whether it allows online submission of Form 15G / H through net banking.
The way to file Form 15 G / H online is given below. (These may vary from bank to bank.)
1. Login to the Internet banking portal using your user ID and password.
2. Select the tax section.
3. Click on Form 15 G / H.
4. Fill in the required details.
5. Click on submit.
6. Download the acceptance slip.
7. Save the service request number for future.