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How can Senior Citizens avoid TDS on Fixed Deposits?

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  • How can Senior Citizens avoid TDS on Fixed Deposits?

How can Senior Citizens avoid TDS on Fixed Deposits?

What is FD?

• FD refers to the fixed deposit in which you deposit a large sum of money with your bank for a specified period in exchange for a set interest rate.
• Fixed deposit is the safest and most preferred investment option because it generally offers a fixed return.
• It is not the same at every bank, but the interest rate is typically much higher than what you would get on a savings account.

TDS on FDs:

• The Indian Financial market offers many investment opportunities, with fixed deposit investments among the most common and secure choices.
• With the constant rate of fixed returns, it is a reliable investment option for investors.
• However, banks will deduct the percentage of TDS if the interest earned on fixed deposits exceeds a specific limit.
• If a policyholder believes they do not fall under the category of taxable income, they can FORM 15G and 15H to request that their financial institutions give up a TDS deduction.
• For this to achieve, you must complete FORMS 15G and 15H.
• When filing taxes, those under 60 must use FORM 15G, and those above 60 can use FORM 15H.
• However, if your income is taxable, you cannot use FORMS 15G or 15H to avoid tax deductibility on your FDs.

Things to consider:

1. When the total interest earned on fixed deposit exceeds INR 40,000, it will deduct TDS at 10% and 20% if PAN details are not there with the financial institutions. The limit for senior citizens is INR 50,000.
2. If an individual has income that is considered taxable, then TDS must be applied.
3. The interest rate on fixed deposits is guaranteed to its policyholders.

Income Tax exemption for Senior Citizens:

• From this year, the Central Government gives tax concessions to senior citizens aged 75 years and onwards.
• Under this, older people are free from paying TDS on FD interest.
• Earlier senior citizens above the age of 60 can use FORM 15H, but those over 75 years and who wish to file income tax returns from this year can submit FORM 12BBA to their banks or financial institutions.

Essentials:

1. FORM 12BBA must be submitted.
2. The exemption is only available to those senior citizens with income from interest on pensions and fixed deposits.
3. The income and fixed deposits must be in the same bank or financial institution.
4. Must unclose deduction details under section 80C to section 80U, tax rebate under section 87A, and net income from FDs.

Conclusion:

As per the income tax rules, the bank will deduct 10% TDS if a senior citizen of 60 and over has an interest income of more than INR 50,000. However, the Government exempted older people aged 75 years and above from paying TDS on FD interest. The benefit of submitting FORM 12BBA is that tax payments withheld from FD interest will be refunded to seniors without inconvenience.