If you take interest from any item, then it is an additional source of your earning. Like any other source, it is also taxed as per Income Tax rules. That is, if it is more than the government’s fixed limit, then the income earned on your investment will be taxed.
new Delhi . Man keeps on putting a part of his earnings in some investment medium. By the way, more people adopt safe investment options only. People prefer to invest money in Fixed Deposit, Recurring Deposit or Public Provident Fund (PPF). Because it does not matter in any ups and downs or difficult situation.
Additional source of interest earning
If you take interest from any item, then it is an additional source of your earning. Like any other source,Income TaxTax is also levied on this as per the rules. That is, if it is more than the government’s fixed limit, then the income earned on your investment will be taxed.
Tax saving benefits
However, you can reduce your tax liability by taking advantage of tax savings under the Income Tax Act 1961. But first you have to understand how interest income is taxed. Things to know about tax on interest earned income.
Tax on interest
Interest earned from fixed deposits is taxable. You have to pay it according to the tax slab. Also, banks deduct TDS (Tax Deduction at Source) when the interest income on fixed deposits reaches Rs 40,000 (Rs 50,000 for senior citizens) in a financial year. Banks levy 10% tax on income above Rs 40,000.
How much tax from NRI
TDS at the rate of 30% and any surcharge on NRIs is deducted as tax. If your total taxable income from all sources is less than the maximum amount which is not taxable, you can claim exemption from TDS by filing Form 15G.
Relief to senior citizens
Section 80TTB allows senior citizens to deduct up to Rs 50,000 in interest earned. If your bank deducts TDS and your total income in a year is less than Rs.500,000, then you may be eligible for refund.
Mathematics of Recurring Deposits
There is no tax benefit on investment in recurring deposits. Income tax will have to be paid on the interest collected from recurring deposits. Tax should be paid at the rate of tax bracket of the recurring deposit holder. Recurring deposit is subject to TDS. It is deducted at the rate of 10% on interest above Rs.40,000. However, no TDS is deducted on interest up to Rs.40,000.
Interest on PPF
You are not bound to pay any tax on interest earned from Public Provident Fund (PPF). Because it is completely discounted. Exempt-Exempt-Exempt (EEE) regime is applicable to PPF. As a result, deposits, interest received and withdrawn are all tax free.
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at businessleaguein@gmail.com
