Fixed deposits have been a go-to investment for Indian citizens. But recent tax changes have made FDs even more attractive. Find out how you can save taxes on your deposits!
New Tax Rules for Fixed Deposits
Many banks offer attractive FD interest rates, but taxes can eat into your earnings. The government has revised tax policies to give relief to depositors.
Did You Know India’s oldest fixed deposit scheme was introduced in 1833 by the Bank of Bengal, one of the three Presidency Banks that later became SBI! FDs have remained a popular savings instrument for nearly two centuries!
TDS Limit Increased
Earlier, if your FD interest exceeded a certain limit, banks deducted Tax Deducted at Source (TDS). The recent budget has increased this threshold:
| Category | Old TDS Limit | New TDS Limit |
|---|---|---|
| General Citizens | ₹40,000 | ₹50,000 |
| Senior Citizens | ₹50,000 | ₹1,00,000 |
This means if your interest income is below these limits, banks won’t deduct TDS. This is a significant relief, especially for middle-class and retired individuals relying on FDs for steady income.
What About Tax on Interest?
Even if no TDS is deducted, FD interest is taxable. You must report it in your Income Tax Return (ITR). The tax rate depends on your income slab.
| Income Slab (₹) | Tax Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001-7,00,000 | 5% |
| 7,00,001-10,00,000 | 10% |
| Above 10,00,000 | 30% |
If your total income remains within the basic exemption limit, you won’t need to pay tax on FD interest.
How to Avoid TDS Deduction?
- Submit Form 15G (if below 60 years) or Form 15H (if a senior citizen) to your bank.
- Split your deposits across multiple banks to stay within limits.
- Choose tax-saving FDs with a 5-year lock-in period for exemptions under Section 80C.
- Invest in Post Office Time Deposits, which offer tax benefits under certain conditions.
Why This Matters for Common Citizens
For many Indians, FDs are a primary investment choice. Unlike mutual funds or stocks, they offer safety and guaranteed returns. The increased TDS limit ensures that small and medium investors don’t lose part of their earnings to premature tax deductions.
Additionally, senior citizens benefit the most from these changes. Since many retirees rely on FDs for regular income, an increase in the TDS threshold allows them to earn more without immediate tax deductions.
Also Read: UPI Credit Cards: A Payment Revolution You Can’t Ignore!
Final Takeaway
This tax relief benefits many FD holders. However, always check how these changes impact your overall tax liability. A little planning can help you maximize returns while staying tax-compliant! Consider consulting a financial advisor to make the most of these changes and optimize your tax savings effectively.
Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, financial, or other professional advice. While every effort is made to ensure the accuracy and reliability of the information, laws and regulations may change, and individual circumstances vary.
Readers are encouraged to consult with qualified professionals or official government resources for personalized guidance regarding their specific situations. The author and publisher disclaim any liability for decisions made or actions taken based on the information provided herein.
