Easy Ways to Bypass TDS on Fixed Deposit interest

by Mariam jakson Marketing Head
When it comes to a risk-free saving scheme, an FD is one of the most commonly chosen methods. You can deposit a lump sum of money, choose a predetermined rate of interest, and watch your money grow over the fixed tenure. This period can range from one week to a few years, depending on your convenience.

You can employ the use of specific calculators available online to help plan your Fixed Deposits. A Fixed Deposit interest calculator is one such financial tool, which enables investors to estimate the returns on the deposit post the completion of the tenure. You just have to input details like the principal amount, rate of interest, and the maturity period, after which you’ll find your final yield.

One of the advantages of Fixed Deposits is that the interest you get during the term can be received as a monthly income after retirement.

You can choose from an array of Fixed Deposits like RD, regular FD, tax-saving FD, floating FD, and special FD, depending on your needs.

  • RD, or recurring deposit, has been popular for many years now and continues to be a favoured saving strategy. A rate of interest is set and a fixed amount is paid every month for the chosen tenure. Once the term is complete, the matured amount can be collected.
  • Regular FD offers a tenure period of one week to ten years, with a priorly set interest rate.
  • Tax-saving FD is a scheme that allows you to save on your tax payments. Under this scheme, you can invest with as little as Rs.100 per month. Since you cannot withdraw the money before the period ends, you get guaranteed returns, apart from the fact that you get to save tax.
  • Floating FD investors can see their Fixed Deposit interest rates changing, depending on the fluctuation in market rates.
  • Special FD is when you get to choose a unique tenure period of 333, 339, 390 or 555 days. Most banks and NBFCs offer a higher rate of interest for these schemes.

Tax deduction at source on Fixed Deposits

Fixed Deposits also fall prey to taxes under income from other sources. The principal amount is immune to taxes but the interest earned on it is chargeable.

If you earn an interest of over Rs.10,000 in a financial year, you are liable to pay a charge of 10.3% of the total interest. So, if you have earned an interest of Rs.15,000 in a year, an amount of Rs.1,545 will be deducted by the financial institution. For a company’s deposit scheme, however, the tax deduction at source (TDS) limit is at Rs.5,000. So if this limit is crossed, the bank, NBFC or post office, will deduct the amount depending on the rate of interest, and the remaining amount can be received by the investor.

Approaches to save your FD interest from TDS

  • 15G/15H forms

Forms 15G and 15H are both used to request banks and NBFCs to not deduct the TDS on the interest of the Fixed Deposits. If your net income from interest is below the taxable limit, you can submit these forms to the financial institutions. These forms are valid for one financial year and must be submitted at the start of the next financial year in case a renewal is required. 

For 15G form, you must to be an Indian resident who is less than 60 years of age to apply. The person can be an individual or a part of a HUF (Hindu Undivided Family). Here, your total income is not considered. The net interest income should be less than the exemptible limit for the respective financial year.
15H is a form that only senior citizens can use to save taxes on their FD interests. The applicant has to be an individual, a resident of India, and at least 60 years of age. 

  • Dividing the FD across financial years

You can save TDS by dividing your FD in such a way that the net income on interest per financial year does not exceed the determined limit. A financial year lasts from the 1st of April of a particular year to the 31st of March of the following year. So, plan and invest in an FD in such a way that your interest rate is within the restricted amount.

For instance, an FD of Rs.50,000 for a tenure of one year can be started in the month of September. As the financial year ends on the 31st of March of the following year, the rate of interest earned will be divided between the two financial years and you can avoid the TDS on your Fixed Deposit.

  • Divide the FD across entities

You can apply for an FD as an individual in a personal account and as an HUF alongside with different entities. Ensure that each account does not exceed the regulated limit on the rates of interest for the financial year to avoid TDS.

In rare cases where a bank or NBFC has levied an unnecessary TDS on your FD, you can apply for a refund by filing income tax returns. Applicants can collect their TDS certificates or 16A forms from the financial institution to submit to the Income Tax Department. You can derive necessary information like the deposited amount and rate of interest from the investor’s PAN numbers. This information comes in handy when retrieving money from the IT department.

Fixed Deposits are one of the most reliable and secure ways of investing your money for eventual and fruitful return. You can easily and almost immediately convert your Fixed Deposits into money once the maturity period is concluded. This liquidity makes Fixed Deposits a beneficial option for most people looking to invest. With the simple measures mentioned above, you can now safeguard your Fixed Deposit from tax deduction at source.

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About Mariam jakson Advanced   Marketing Head

89 connections, 4 recommendations, 248 honor points.
Joined APSense since, January 9th, 2019, From Delhi, India.

Created on Mar 14th 2019 23:39. Viewed 417 times.


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