Income Tax Return (ITR) has to be filed by 30 September for the financial year 2020-21. While filing ITR, it is important to give correct information about your income. Many people are not aware that interest earned on savings account, fixed deposit (FD) and recurring deposit (RD) also attracts income tax.
The interest earned from them is considered as ‘income from other sources’.
The interest earned from these savings schemes is treated as ‘income from other sources’ under the Income Tax Act. Today CA Abhay Sharma is telling you how much tax is levied on the interest income on these three investments.
savings account
Under Section 80TTA of the Income Tax Act, income up to Rs 10,000 per annum from interest is tax free in the case of savings account of a bank/co-operative society/post office. Its benefit is available to a person below 60 years of age or HUF (Joint Hindu Family). At the same time, for senior citizens, this exemption is 50 thousand rupees. TDS is deducted if the income exceeds this.
Additional deduction of up to Rs 3500 can be claimed under section 10(15) on interest income earned from post office savings account annually. This additional deduction is available in addition to the limit of Rs 10000/50000.
Fixed Deposit (FD)
If the interest received on bank FD in a financial year is less than 40 thousand rupees, then no tax will have to be paid on it. This limit is for people below 60 years of age. At the same time, income up to 50 thousand rupees from FD of senior citizens above 60 years of age is tax free. 10% TDS is deducted on income above this.
Tax on interest from RD
If the interest income from Recurring Deposit (RD) is up to Rs 40000 (Rs 50000 in case of senior citizens), then you do not have to pay any tax on it. 10% TDS is deducted on income above this.
If you do not have a PAN, then more tax is levied
10% TDS is deducted by the bank if the interest income is more than the prescribed exemption limit, but if you have not given PAN then the TDS rate becomes 20%.
Submit Form 15H and 15G if not eligible for tax
Bank TDS is not deducted if your annual interest income from savings account, FD or RD is more than Rs 10000, 40000 and 50000 respectively but the total annual income (including interest income) is not to the extent that it is taxed Is.
For this, senior citizens have to submit Form 15H to the bank and Form 15G to others. Form 15G or Form 15H is a self-declared form. In this, you state that your income is outside the tax limit. Whoever fills this form will be kept out of the tax net.
What is TDS?
If tax is deducted from any income of a person and the remaining amount is given to him, then the amount deducted as tax is called TDS. The government collects tax through TDS. It is deducted on different types of income sources like salary, interest or commission received on any investment etc. Any institution (which comes under the purview of TDS) which is paying, deducts a certain amount as TDS.
