How is TDS Calculated on Fixed Deposit
Fixed Deposit is the safest way to invest money in Indian economy. You are 100% certain about the type of return you will get and you can break the FD at any point of time. But before investing in FD’s you should know how TDS can trim your returns. According to RBI, banks will have to deduct TDS from your FD if the interest from it is cumulating to Rs 10,000 or more annually.
These are the few examples that will show how TDS is calculated and deducted from your FD.
1) If you have updated your PAN card in your account then a flat 10% TDS is deducted from FD’s if the interest is above Rs 10,000 annually. For Example if you have an FD of Rs 2 Lacks and its interest is coming out to be Rs 20,000 per year than a flat Rs 2000 would be deducted from your interest and you will get a net interest of Rs 18,000. This amount would be credited to IT department against your PAN Card. You can see the details of this transaction in your form 26 AS.
2) If you have not updated you PAN Card in your bank account.
If you have an FD of RS 2 Lakhs and your interest on this FD is coming out to be Rs 20,000 per annum then a flat 20% (Since you have not updated your PAN card in your account) of your interest that is Rs 4000 would be deducted and your net profit from FD would be Rs 16,000. You cannot see this transaction in Form 26 AS as there is no PAN Card on which this transaction can be done.
You can save this TDS to be deducted from Bank by submitting Form 15G/H to your respective banks. If your bank have already deducted this amount from your FD’s and you are not lying in the range of tax deduction then you can ask for a TDS certificate from your bank and avail a tax rebate in your Income tax return.
Now Points to take note is. A handsome amount of Money is deducted from FD in the form of TDS. So if you are planning to invest in this medium then plan make sure you have taking account of the net profit after proper understating the TDS deduction.