Tax Saving: You will have to pay this much tax on the income from FD, you can save in these 3 ways..

Usually, people invest in FD to save tax. But tax has to be paid on the income from FD as well. There is a fixed limit of tax on the interest received from Fixed Deposit (FD). If you earn more than that in a year, then tax is deducted. The income from Fixed Deposit is added to the annual income and then tax is deducted according to the tax slab.

Know when and how much tax is deducted.

If the income from Fixed Deposit exceeds a fixed limit, then tax is deducted on it and this limit is different for senior citizens and general customers. If you are a senior citizen, then there is no tax on the interest received from FD up to Rs 50 thousand annually. On the other hand, if you are not a senior citizen, then the income up to Rs 40 thousand from FD is tax-free. After this, the interest income will be fully taxable.

Therefore, it should be remembered that TDS is deducted at the time of deposit of interest and not when the FD matures. In such a situation, if you have an FD for 3 years, the bank will deduct TDS at the end of each year. When the FD matures, the depositor gets both interest and principal. Additionally, FDs up to Rs 5 lakh are insured by DIGCI. That is, if the bank collapses, the depositor will get Rs 5 lakh as a guarantee from DGCI.

How is tax calculated on FD?

The income from FD is added to your total income every year in the Income Tax Return. Even if you do not get the interest money that year and the bank give the money by adding it together on maturity of the FD, you have to show it in every year's ITR. Banks deduct TDS from you which the Income Tax Department later adjusts.

If the bank does not deduct TDS on FD interest, then the interest income is added to your total income and tax is calculated accordingly. Always keep in mind that show the interest income every year in ITR, do not wait for the FD to mature. On maturity of FD, a large amount will come in your account due to which you will come in the higher tax slab. If you show less interest every year, then you will be included in the lower slab of tax.

Understand in an example -

Suppose Bhupendra comes in 20 percent tax slab, he has made two FDs of one lakh rupees for a period of three years. On which he gets 6 percent interest (FD Rates). So Bhupendra gets 6 thousand rupees annually on each FD, then the total interest of both FDs will be Rs 12000. This money is less than the limit of Rs 40 thousand, so the bank will not deduct TDS.

On the other hand, take another example. Sachin has an FD of Rs 10 lakh. On which they get interest at the rate of 6 percent. So in a year, a total of Rs 60,000 interest is received. The bank will deduct TDS at the rate of 10 percent on the entire 60,000 rupees i.e. Rs 6000. Here the prescribed rate of TDS will be 10 percent.

Know the way to save tax here -

1. If your annual income is less than 2.5 lakhs, then you can file or use Form 15G / 15H. The interest income of FD is less than 2.5 lakhs, so this income will not come under the purview of tax. By filing Form 15G / 15H, the bank will not deduct TDS. In such a situation, your income from FD will become tax-free.

2. If you make FD in the post office apart from the bank, then you can save a lot of tax here. Less tax is deducted on making FD in post office as compared to banks. But the interest rate on fixed deposits in post offices is low. But you can save tax here.

3. If you open an FD in the name of your partner or parents and children, then tax on the income from fixed deposits is calculated for each person on the slab in which they fall. You can also save tax if you open FDs in different branches and banks.

Disclaimer: This content has been sourced and edited from Hr Breaking. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.