Rs 10,000: maximum interest amount you can earn on all your fixed deposits, without TDS
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This is the maximum interest amount you can earn on all your fixed deposits (FDs), without attracting tax deducted at source (TDS). TDS is applicable on incomes such as: salary, interest, commission, rent, brokerage, professional fees and royalty. If you have a fixed deposit, and in a financial year you earn an interest amount of up to Rs10,000, then TDS is not applicable, as per section 194A of the Income-tax Act, 1961. But if your interest income from the deposits exceeds Rs10,000 during the financial, then TDS will be applicable on the amount. But, if your total income is below the taxable limit, you can ensure that it is not deducted.
For this, you will have to submit a self-declaration in the prescribed forms 15G or 15H to avail TDS exemption under sections 193 and 194A of the Act in accordance with the provisions of section 197A.
Form 15G is submitted by individuals who are under 60 years of age, if their income is below the taxable limit. Form 15H is submitted by senior citizens who are above the age of 60 years, if their income is below the taxable limit.
It is recommended that these forms should be submitted to the bank at the beginning of the financial year. This will ensure that the bank does not deduct TDS on the interest amount you earn from FDs. Thus, you will get the entire interest income when your FDs mature.
The TDS collected by the bank is directly deposited to the tax authorities on behalf of the customer.
Also, provide your permanent account number (PAN). TDS is deducted at the prescribed rate of 10% by the tax department if PAN is provided or at the rate of 20% in absence of PAN.