Pay Income Tax on Fixed Deposit’s Interest Income at Right time in the right way!
Fixed Deposits (FDs) continue to be the preferred investment for some obvious reasons. The FDs provide assured returns, flexibility in fixing savings, higher interest rates vis-à-vis regular saving schemes and are eligible for tax exemption under Section 80C. However, the total fixed deposit annuity is taxable as per the applicable slab rates. When filling the Income Tax Return (ITR), the FD interest income is mentioned under the section “Income from Other Sources.”
When to pay?
Shall there be any Income tax on fixed deposit liability upon interest income inclusion; it has to be paid prior to 31st March each year. However, if the annuity is exceedingly large, Advance Tax needs to be deposited quarterly. Notably, the Finance Act 2018 exempts FDs received by senior citizens from income tax provided the total income is INR 50, 000 or below.
TDS and interest income:
It is important to understand the TDS provisions to get the gist of your final tax liability. TDS, an acronym for Tax Deducted at Source, is a self-explanatory term. Your payer is supposed to deduct TDS on the amount payable to you and deposit it in the government exchequer. On your part, the TDS has to be adjusted against the total tax payable by you. Your bank will deduct the TDS on interest on FD automatically, usually annually, and not upon FD maturity.
How to pay?
The FD income tax can be paid online at the Income Tax Department website via Challan 280. The process is simple and time efficient, requiring you to furnish personal info, check receipt and declare paid taxes.
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