Fixed Deposits (FDs) are a great source of financial support for many investors, especially senior citizens. FDs are also suitable for investors who are looking for a low-risk return portfolio for their savings or want to accumulate money for retirement.Â
Bank FDs generally have different tenors ranging from 7 days to 10 years, in which the money is deposited and you get a fixed rate of interest on it. However, the interest earned on FD is not tax free. Rather you have to pay TDS (Tax Deduction at Source) on it. We will tell you here how you can avoid paying TDS.
TDS is deducted on how much interest amount
First of all, know that TDS is deducted on interest exceeding the limit in a year. Ordinary investors (non-senior) investors do not have to pay any TDS if they get interest on FDs up to Rs 40000 in a year. Senior citizens get exemption on interest amount up to Rs 50,000 annually. But the general citizen will have to pay TDS on interest amount exceeding Rs 40000 and senior citizen Rs 50000 in a year. Let us tell you that earlier this limit was only 10000 rupees.
Easy to understand complete multiplication
If a person invests 2 places of Rs 1 lakh in FD for 3 years (i.e. makes 2 FDs of Rs 1 lakh each) and is offered an interest rate of 6 per cent per annum, then he will get total interest of Rs 12000 in the first year. will get. This interest is less than the limit of income (Rs 40000 for non-senior citizen) above which TDS is deducted. That is, he will be saved from TDS.
When will TDS be deducted
Now suppose that the same person makes an FD of Rs 10 lakh instead of 2 FDs of Rs 1 lakh each, then he will get an interest of Rs 60000 at 6 percent interest rate. In this way he got Rs 20000 more than the limit of Rs 40000 (for non senior citizen). But the bank will not deduct TDS on these Rs 20000, but on the entire Rs 60000.
Know 3 great and easy ways to avoid TDS
1. Form 15G/15H
If someone’s annual income is less than Rs 2.5 lakh, then he should file Form 15G/15H. You will get tax exemption if your earning is less than 2.5 lakhs. After filing this form, the bank will not deduct TDS on your interest. You will not have to pay any tax on FD interest.
2. Tax Saving FD
2. If you invest in tax saving FDs, you can get a deduction of up to Rs 1,50,000 in a financial year (under section 80C of the Income Tax Act, 1961). However, note that tax saving FDs have a lock-in period of 5 years and premature withdrawal is not allowed.
3. Make FD in someone else’s name
If your income is taxable, then you can get an FD in the name of a close relative who does not fall in the taxable bracket. You can get FD done in the name of spouse, parents or children.
