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Bank FD: Due to fixed returns and low risk, even today many investors prefer fixed deposits (FDs) despite many investment options. Investors can choose the duration of FD according to their needs. Many banks offer attractive interest rates on FDs. However, TDS (tax deduction at source) applies to interest earned on FDs.

What is TDS?

TDS (tax deduction at source) is a tax collected directly by the government at the source of income. When you receive income like interest, rent, or salary, TDS is deducted. This amount is deposited with the government. You can get back excess TDS by filing income tax returns. This streamlines tax collection and reduces tax evasion.

How is TDS levied on FD-

Interest is received on FDs made by investors in banks. TDS is deducted by the bank on this interest. Which is deposited in the government account. TDS is deducted as per the pre-determined rates. Which is added to the income tax account of the person.

How is TDS calculated-
The interest received on FD (Bank FD) is fully taxable. Which is considered as income from other sources. TDS is calculated on this according to the amount of interest, period, and tax slab of the person.

If the taxable income of a person is less than Rs 2.5 lakh per annum, then tax is not paid on it. If tax is also deducted at source by the institution, then a tax refund can be obtained later by filing income tax return.

When will you not have to pay tax on FD interest-
If a person has earned interest of Rs 40,000 or less annually on FD, then in such a case TDS will not be paid. When the interest received on FD exceeds Rs 40,000, then 10 percent TDS is deducted by the bank on the interest.

- Senior citizens do not have to pay any TDS on interest up to Rs 50,000.

- 20 percent TDS will be deducted in this case

- If a person does not have a PAN card, then he may have to pay twenty percent TDS on the interest of FD.

Disclaimer: This content has been sourced and edited from Hr Breaking. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.