Find out how much tax is levied on interest earned on bank FD, RD and savings accounts, how much tax is deducted on which account and how much income is considered tax free.
Savings account interest up to Rs 10,000 per annum is tax free
If the interest earned on bank RD and FD is more than Rs 40,000 in a financial year, tax has to be paid on it.
Interest earned on savings account, fixed deposit (FD) and recurring deposit (RD) is also subject to income tax. Under the Income-tax Act, the interest earned from these savings schemes is treated as ‘Income from Other Sources’. Here you will find out how much tax is levied on interest income on these three investments.
Under Section 80TTA of the Income Tax Act, in case of interest on a savings account of a bank / co-operative / post office, an annual fee of Rs. Income up to Rs 10,000 is tax free. The benefit is given to those below 60 years of age or HUF (Joint Hindu Family) and the exemption is Rs 50,000 for senior citizens. TDS is deducted if the income is more than this.
Fixed Deposit (FD)
If the interest earned on a bank FD is less than Rs 40,000 in a financial year, no tax is levied on it. This limit is for people below 60 years of age as well as senior citizens, i.e. those above 60 years of age are tax free from income up to Rs. 50,000 from FD. 10% TDS is deducted on income above this.
Tax on interest received from RD
If the recurring deposit (RD) interest income is up to Rs. 40,000 (Rs. 50,000 in case of senior citizen), you will not have to pay any tax on it. 10% TDS is deducted for income above this.
If you don’t have a PAN, it will cost more
10% TDS is deducted by the bank if the interest income exceeds the prescribed free limit, but if you do not provide the page number then the TDS rate is reduced to 20%.
What to do if your total income tax is not paid?
If the annual interest income, FD or RD from your savings account is more than Rs. 10,000, Rs. 40,000 and Rs. For this, senior citizens have to submit Form 15H to the bank and others have to submit Form 15G. Form 15G or Form 15H is a self declaration form. In this you can state that your income is beyond the tax limit. Anyone who fills out this form is excluded from the tax limit.
What is TDS?
If a person has any income then the amount deducted as tax after deducting tax from that income is called TDS (Tax Deducted at Source). The government collects taxes through TDS. It is deducted from various sources of income, such as salary, interest on any investment or commission, etc. Any organization (which falls within the limit of TDS) deducts a certain amount as TDS.