How are fixed deposits taxed? Here’s everything you need to know!

A fixed deposit, as you know, is the way of investment that banks and NBFCs offer. Investors earn best interest rates on fd than that of a regular savings account, until the specified maturity date. It’s not mandatory to create a separate account for fixed deposits. One can get a chance to deposit a massive amount fixed deposit up to a certain amount. 

fixed deposit

The minimum amount of fixed deposit varies from bank to bank. The lock-in period of these deposits is five years. Investment in the fixed deposit can be made from any private-sector or public bank. Apart from fixed earnings, FDs are a convenient mode of investment and offer considerable stability. In accordance with the deposit’s duration, the invested money earns interest. The deposited money will not be accessible before maturity, though it can still be withdrawn after delivering a penalty. High returns are offered to senior citizens. 

There is also the facility of nomination in fixed deposits. A fixed deposit can be held jointly also. In the case of joint mode, only the first holder can avail of the benefit of tax. Apart from fixed earnings, FDs are secured mode of investment and offer considerable stability. Depending on the duration of the deposit, the invested money earns interest.

When and how is tax paid on Fixed Deposits?

Depending on the income of the investors, tax deducts on FDs. If you earn an interest of more than Rs 10000 per year, banks deduct 10% TDS, provided that your pan card details are submitted to the bank. In the absence of pan cards, a TDS of 20% is deducted. 

A refund of the deducted TDS can be claimed if an individual’s total and interest income is below the tax slab of 10%. As per the Union Budget Announcement 2018, once fixed deposit income crosses 50,000, it gets taxed. Tax is not deducted at source in company FD’s. Tax can be paid as per the earnings of an individual when the interest earnings exceed Rs 5000 in a financial year.

TDS on FD

In both tax-savings fixed deposits and normal fixed deposits, taxation treatment remains the same. One benefit that you get is the initial deposited amount can be claimed as a deduction. High income reflects in high tax slab. An individual needs to pay extra tax over the deducted TDS if they fall in the higher tax bracket. Your total income and the income you invested in fixed deposit get added, and the taxation is done accordingly. 

Form 15G/H eligibility

Anyone whose total income is below Rs 250000 tax slab mark is not expected to pay any tax. They need to submit form 15G/H to the bank along with the income proof. Those who are below 16 years need to submit Form 15G, and seniors need to submit 15H. 

Income from fixed deposits is liable to taxation. Money can be deposited in a fixed deposit account only once, and another account is to be created if an individual wants to deposit more money. Renewal of fixed deposits can be easily done.

There is no danger of the loss on the principal, and returns are assured on FDs. The fluctuations in the market won’t affect your fixed deposit, which ensures greater protection of investment capital.