Fixed deposits, though being the most demanded risk-free investment, are fully taxable. If the interest earned is more than Rs. 40,000 for regular depositors and Rs. 50,000 for senior citizens, it is taxable being subject to TDS under section 194A of Income Tax Act, 1961. In order to avoid paying taxes on your returns, all you need to know is the most common method adopted by investors, i.e., submitting Forms 15G and 15H issued by banks that need to be submitted at the beginning of the fiscal year.
Here’s all that you need to know about Form 15G and 15H:
Form 15G: The form is applicable for regular investors who are below the age of 60 years, and are residents of India. Individuals, HUF, Trusts or any other assesses are valid but not a company or a firm. Apart from this, the tax calculated on the total income has to be zero. Also, the total interest income for the year should be below than the basic exemption limit as advised for each assessment year (A.Y). For AY 2018-19 it was Rs 2,50,000. The validity of form is only for one financial year, thus, it has to be submitted every year. The form is available on any bank website else you can also obtain a hardcopy by directly visiting the bank.
One of the most important points to remember while filling form 15G is to avoid overstating your estimated income. Don't forget to attach a copy of your PAN card. Also, double check the form after filling and do not forget to mention the correct assessment year.
Form 15H: This form is quite similar to 15G and is used to reduce the TDS burden. The form is applicable for senior citizens i.e. investors above 60 years of age who are residents of India. Again, only individual investors can use this form. Tax computed on your total income should be zero. This form too is just valid for one financial year, thus has to be filled each year. The form can be easily availed from any bank website or by visiting the branch. Things to keep in mind while filling the form are quite common to 15H form.
The points mentioned above should be kept in mind while filling the forms and to avoid TDS. This annual ritual is a must to bypass TDS on FD interest income earned from FDs. You can also submit 15G/H forms through your online net banking logins.
This is the most common and demanded methods to safeguard your investment from the tax burden on FDs. Company fixed deposits offer higher returns than bank FDs. However, you need to pay TDS if the interest income from company FDs exceeds Rs. 5,000 in an A.Y. In that case, you can consider earning a high rate of interest, as in Bajaj Finance FD of 9.1% (for senior citizens) in lieu of the TDS formalities.
You can combine the strategies of investing in non-cumulative FDs coupled with the laddering of your FD investments to schedule your interest payout in such a manner that you don’t have to pay TDS. Bajaj Finance Fixed Deposits (FD) are highly credible as they are rated FAAA/Stable by CRISIL and MAAA (stable) by ICRA. You can avail attractive interest rates along with the safety of your principal amount. Online application via Experia- your online fixed deposit account and online FD calculator to calculate returns in advance makes it easy for you to manage and track your FDs.