If you have a bank fixed deposit, it’s time to make sure that your bank does not deduct tax at source on the interest income earned. The bank will not make any such deduction if you are exempted from paying taxes. But, in case you have bank fixed deposits where the interest earned is more than Rs 40,000 in a financial year, the banker will cut tax at source unless your income falls in the exempted slab. For senior citizens, the limit stands at Rs 50,000 in one financial year.
The bank FD interest income is fully taxable in the hands of the investor and banks levy TDS which may be adjusted while filing the income tax return.
The interest income from bank fixed deposits is subject to TDS at 10 per cent but can be deducted at 20 per cent if PAN is not furnished. So, if you are in the highest tax bracket of 30 per cent, merely paying TDS of 10 per cent will not be enough.
And, those who do not income above the exempted limit may intimate the bank, not to deduct TDS.
Such an intimation is to be made generally at the beginning of the financial year by submitting Form 15G / Form 15H to the banker. Form 15H is for an individual who is of the age of sixty years or more ( senior citizens) while Form 15G is for all others for whom the total income will not exceed the maximum amount which is not chargeable to income-tax.
If you had already submitted such forms, related to fixed deposits, in the previous year, you will be required to do it again this year.
Such Forms may be submitted only by those whose income is below the exemption limit as per the Income Tax Act.
For those who are less than 60 years, income up to Rs 2.5 lakh is exempted, while for those over age 60 but under age 80, income up to Rs 3 lakh is exempted from tax.
And, for those above 80 years, there is no tax liability up to Rs 5 lakh. These individuals can submit Form 15G / Form 15H to their banker for non-deduction of TDS on interest income earned in bank FD.