While individuals do not "file a TDS return" for their fixed deposits (this is the responsibility of the bank or financial institution that deducts the tax), you can certainly manage, prevent, or claim the Tax Deducted at Source (TDS) on your fixed deposit interest. This is primarily done through submitting specific forms to your bank or by claiming the credit when filing your Income Tax Return (ITR).
Understanding TDS on Fixed Deposit Interest
TDS is a mechanism by which tax is deducted at the source of income. For fixed deposits, the bank deducts a certain percentage of the interest earned before crediting it to your account, if the interest exceeds a specified threshold.
- TDS Thresholds:
- For general citizens: If your interest income from fixed deposits with a particular bank branch exceeds ₹10,000 in a financial year, TDS will be applicable.
- For senior citizens (age 60 and above): The threshold is ₹50,000 in a financial year.
- TDS Rates:
- If you provide your PAN, TDS is deducted at 10%.
- If you do not provide your PAN, TDS is deducted at a higher rate of 20%.
Preventing TDS Deduction: Filing Form 15G or Form 15H
If your total income for the financial year is below the basic exemption limit, you can prevent your bank from deducting TDS on your FD interest by submitting Form 15G or Form 15H. This is a crucial step for individuals to manage their TDS on FDs.
Key Forms for TDS Exemption:
Feature | Form 15G | Form 15H |
---|---|---|
Eligibility | Indian residents below 60 years of age, HUFs. | Indian residents aged 60 years or above (senior citizens). |
Condition | Estimated total income for the financial year must be below the basic exemption limit, and the total interest income for the year must be less than the basic exemption limit. | Estimated total income for the financial year must be below the basic exemption limit. |
Purpose | Declaration that income is below the taxable limit, requesting no TDS deduction. | Declaration that income is below the taxable limit, requesting no TDS deduction. |
Submission | Submit annually to your bank or financial institution. Can be done physically or online. | Submit annually to your bank or financial institution. Can be done physically or online. |
How to File Form 15G/15H with Your Bank:
- Obtain the Form: You can download Form 15G or 15H from the Income Tax Department's official website or obtain it from your bank branch. Many banks also offer the option to submit these forms online through their net banking portal.
- Fill in Details: Carefully fill in all required details, including your PAN, estimated total income for the financial year, estimated interest income, and other relevant information.
- Submit to Bank: Submit the completed form to your bank or financial institution. If submitting online, follow the steps provided by your bank's net banking service.
- Annual Submission: Remember that these forms are valid for one financial year and must be submitted annually at the beginning of each financial year (typically in April) to ensure continuous non-deduction of TDS.
By filing Form 15G or Form 15H with your bank, you are essentially declaring that your income is below the taxable limit and that no tax should be deducted at source.
Claiming TDS Deducted in Your Income Tax Return (ITR)
Even if TDS has been deducted on your fixed deposit interest, you can still claim it back as a refund when you file your Income Tax Return. This is how you "claim a deduction for the TDS paid" as an individual.
Steps to Claim TDS in ITR:
- Verify TDS with Form 26AS/AIS:
- Before filing your ITR, it's crucial to check your Form 26AS or Annual Information Statement (AIS) on the Income Tax e-filing portal.
- Form 26AS/AIS provides a consolidated statement of tax deducted at source, tax collected at source, advance tax paid, and self-assessment tax paid. Ensure that the TDS deducted by your bank on your FD interest is reflected correctly here.
- Report Interest Income:
- In your ITR form, accurately report the entire interest income earned from your fixed deposits under the "Income from Other Sources" head. Do not report the income after TDS deduction; report the gross interest income.
- Claim TDS Credit:
- In the relevant section of your ITR form (typically Schedule TDS), enter the details of the TDS deducted, as shown in your Form 26AS.
- The tax paid via TDS will be adjusted against your total tax liability.
- If your total tax liability is less than the TDS deducted, you will be eligible for a refund.
- File Your ITR:
- Submit your Income Tax Return electronically through the official Income Tax Department portal.
- Once processed, any eligible refund will be credited to your bank account.
Important Considerations for Managing TDS on FDs
- PAN is Mandatory: Always provide your PAN to your bank. If you don't, TDS will be deducted at 20% instead of 10%.
- Consolidated Interest: Remember that the TDS threshold applies to the total interest from all fixed deposits with a single bank branch. If you have FDs across multiple branches or banks, each may apply the threshold independently, but your total interest income across all sources is taxable.
- Annual Submission: Form 15G/15H must be submitted every financial year to avoid TDS deduction.
- Declaration of Correct Income: Ensure that the income declared in Form 15G/15H and your ITR is accurate. False declarations can lead to penalties.
By understanding these mechanisms, individuals can effectively manage their tax liability related to fixed deposit interest income.