News on X reported that a customer became enraged and assaulted a bank employee following a Tax Deducted at Source (TDS) deduction on a Fixed Deposit (FD).
The tax shall be deducted at the flat rate of 10 per cent if the aggregate of interest credited/paid exceeds the threshold limit during the Financial Year. In the case of bank/post office deposits, for senior citizens, the threshold limit for interest income exemption is Rs 50,000, and for others, it is Rs 40,000
News on X reported that a customer became enraged and assaulted a bank employee following a Tax Deducted at Source (TDS) deduction on a Fixed Deposit (FD).
What Is TDS On FD And How Does It Affect You
The TDS on FD interest is governed by Section 194A of the Income-tax Act, 1961.
Section 194A of the Income-tax Act provides the TDS rate in case of interest earned by the taxpayer (Other than Interest on Securities). Tax is required to be deducted under section 194A only if the interest is payable to a person who is a resident of India.
“The tax shall be deducted at the flat rate of 10 per cent if the aggregate of interest credited/paid exceeds the threshold limit during the Financial Year. In the case of bank/post office deposits, for senior citizens, the threshold limit for interest income exemption is Rs 50,000, and for others, it is Rs 40,000,” says Rahul Singh, senior manager, Taxmann, tax and corporate advisor.
Suppose you have a fixed deposit of Rs 1,00,000 with an interest rate of six per cent per annum. The interest earned for the year would be Rs 6,000. Since Rs 6,000 is below the threshold of Rs 40,000, no TDS will be deducted.
However, if you have multiple FDs, and the total interest across them exceeds Rs 40,000, the bank will deduct 10 per cent TDS on the amount exceeding the threshold. For instance, if you earn Rs 45,000 in interest, a TDS of Rs 4,500 (10 per cent of Rs 45,000) will be deducted.
How To Report TDS When Filing IT Returns
When filing your income tax returns (ITR), it is important to report the TDS deducted on Fixed Deposit (FD) interest accurately. The first step is to check your Form 26AS, which provides a detailed summary of all taxes deducted on your behalf, including TDS on FD interest. You can access Form 26AS on the Income Tax Department’s portal.
Next, report the total interest income earned from all your Fixed Deposits under the section "Income from Other Sources" in your ITR. This includes the interest from both taxable and tax-exempt FDs.
In the "Taxes Paid and Verification" section of the ITR, enter the TDS amount that is shown in Form 26AS. This ensures that the TDS already deducted by the bank is reflected in your returns and is adjusted against your final tax liability.
Lastly, if your FD interest is below the TDS threshold but still needs to be declared, include it as income from "Other Sources" and pay any additional tax if applicable.