Investing In Bank Fixed Deposits? Five Rules You May Not Know

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Banks deposits are one of the most popular investments among Indians. Yet many people are not aware of some of the rules, particularly pertaining to the taxability of interest income.

Here are some of the facts you may not be aware of:

1) If the interest earned on your fixed deposits is more than Rs 10,000 a financial year, TDS (tax deducted at source) will be deducted at the rate of 10 per cent. But if you don’t provide your PAN (permanent account number) tax will be deducted at the rate of 20 per cent. Now, recurring deposits have also come under the purview of this rule.

2) TDS is applied after consolidating all the deposits across branches of a bank while earlier it was applicable only on a single branch. Now, if the aggregate interest on recurring deposits or fixed deposits made in one or more branches of the same bank is over Rs 10,000 in a financial year, TDS will be deducted.

3) Even if the bank has deducted TDS, you will have to declare it in your income tax return. Interest income is taxable as per your tax slab. Banks deduct TDS at the rate of 10 per cent and if you fall in the higher tax bracket, you should pay the extra tax while filling the tax return.

4) You can save TDS being deducted from your interest income by submitting form 15G or 15H, if your taxable income is less than the total exempted income (Rs 2.5 lakh) in a year and your tax liability is nil for the year. But if you forgot to submit these forms, you will have to file tax return to claim refunds.

5) No TDS is deducted in case of savings bank account interest income. However, if your interest income for the year is more than the exempted limit of Rs 10,000, you will have to pay tax on it and show it in your tax return.