You do not have to pay TDS on FDs under this amount Income tax returns (ITR)
February, 06th 2019
If your bank has deducted the TDS from your interest income on FDs, then you can declare the deducted amount in your ITR filing form and the IT department will automatically refund your paid sum in your bank account.
Did you feel that your bank fixed deposits are not giving you hefty enough returns? Well this is understandable, because despite giving attractive interest rates on your investment in fixed deposits, yet the bank has to deduct some taxes from your gains. These taxes are in the form of tax deducted at source (TDS) and are levied on your interest income arising from bank deposits on an annual basis. It would not be wrong to say that, fixed deposits are among the most traditional format of investment in India, and also not the most preferable tool considering there are a host of schemes that give better returns. However, what will come as music to your ears is that this is set to change. Through Budget 2019, interim Finance Minister Piyush Goyal, has just given the good news on your fixed deposits - your TDS limit has been hiked.
In Budget 2019, Goyal announced that TDS deducted by banks has now been exempted to Rs 40,000 from previous Rs 10,000 on deposits. Apart from FDs, this move will also help boost recurring deposits as well.
Talking about the move, Rajnish Kumar, Chairman, SBI said, “Hiking the ceiling limit for TDS on bank deposits and small savings will act as a catalyst for this deposit segment by attracting the new depositors.”
Surely, this is a gateway for more deposits to the banks and more gains on interest for customers!
Firstly, you should remember that interest income on your bank deposits is fully taxable as it falls under ‘income from other sources’ section of a salaried employee.
How does TDS work on your fixed deposits?
For instance, if a person, entity or in this case banks pay you, then that entity paying you will have to deduct a certain tax before giving you the net amount. This is how it works with interest income on FDs. The amount which is deducted by banks is paid to tax department. Then you add the amount in your income and adjust TDS in your final tax liability.
Every year, banks deduct a TDS from your interest earned on FDs. So, if, let’s say, you have deposited Rs 1.5 lakh as FDs for a tenure of 5 years, each year a TDS will be deducted.