Fixed Deposit ( FD): For some individuals, putting money in fixed deposits (FD) appears to be a highly secure choice. Individuals seeking assured returns and wishing to steer clear of stock market uncertainties view investing in fixed deposits as a preferable choice. A question that often arises for many is if income tax needs to be paid on the interest earned from fixed deposits?
Bank fixed deposits and those from non-banking financial companies (NBFCs) qualify for tax deductions. In addition to this, the regulations concerning taxation on fixed deposits are also influenced by age. If a person is under 60 years old, they are taxed on interest of Rs 40,000 or more for that financial year; however, if they are over 60, the threshold increases to Rs 50,000 rather than Rs 40,000. In addition to this, your tax bracket also dictates the amount of tax you will owe on the interest from fixed deposits.
For instance, if you are in the 20% tax bracket, you will need to pay a 20% tax on the interest earned from fixed deposits. When submitting your Income Tax Return (ITR), it is necessary to provide details regarding the interest earned on fixed deposits. To guarantee accurate taxation, your fixed deposit’s interest earnings are liable for TDS deduction by banks. The government collects this TDS sum directly from the taxpayers.
TDS on interest from fixed deposits
TDS on interest from fixed deposits is charged on earnings exceeding Rs 40,000 for individuals under 60 years and Rs 50,000 for seniors above 60 years. The tax deduction rate is 10%.
Interest tax limit for fixed deposits in NBFC
The interest tax limit for fixed deposits in NBFCs is Rs 5,000. If a company’s fixed deposit earnings surpass Rs 5,000, the interest becomes taxable with TDS deducted at 10%.