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Tax on Fixed Deposits
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Fixed Deposits by Banks, Post Offices and Corporate are popular fixed income options for Indians.
However, Interest income from Fixed Deposits is taxable in the hands of depositors, whether it is done from a Bank, or a Non-Banking Financial Institution.
Further, from FY 2019-20, interest income above Rs. 40,000 per year is subjected to Tax Deduction at Source (TDS).
This is allowed vide an amendment in Section 194A of Income-Tax Act, 1961 in Budget 2019.
This limit, earlier used to be at Rs. 10,000.
Though TDS is not taxable, the depositor has to do his self-assessment and pay tax appropriately.
This translates to the fact that a depositor can deposit Rs. 5,00,000 and still not get subject to TDS.
This new TDS norms for fixed deposits are allowed when fixed deposit is opened with a bank / post office and not with Housing Finance Companies (HFC)s.
Tax exemption under Section 80TTA/80TTB
Income from Savings bank accounts held in banks (including co-operative banks) / post-offices are exempt from income tax up to Rs. 10,000.
Related Lessons
- Tax on Dividend Income
- Tax on Bonds
- Filing Income Tax Returns
- Income-tax Return Forms or ITR Forms - Which form to use when?
- Plan your tax payment and tax savings
- Saving tax under Section 80C
- Advance Tax - Who should pay? Due dates etc.
- Tax on receiving gifts
- Tax-free income
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