In case of savings account, the interest income up to Rs. 10 thousand per annum is tax-free. If the interest received on bank RD and FD in a financial year is more than 40 thousand, then tax has to be paid on it.
Income tax is also to be paid on interest on a savings account, fixed deposit (FD) and recurring deposit (RD). Under the Income Tax Act, interest from these savings schemes is considered ‘income from other sources’. Today we are telling you how much tax is charged on interest income from interest on these three investments.
Under Section 80TTA of the Income Tax Act, interest income up to Rs. 10 thousand per annum from interest is tax free in case of savings account of bank / co-operative society/post office. Its benefit is given to a person below 60 years of age or HUF (Joint Hindu Family). At the same time, this exemption is 50 thousand rupees for senior citizens. TDS is deducted if there is more income than this.
Fixed Deposit (FD)
If the interest received on a bank FD in a financial year is less than 40 thousand rupees, then there is no tax on it. This limit is for people under 60 years. At the same time, income up to 50 thousand rupees from FD of the senior citizen is above 60 years of age. 10% TDS is deducted for income above this.
Tax on interest from RD
If interest income from Recurring Deposit (RD) is up to Rs 40000 (Rs 50000 in case of Senior Citizen), then you do not have to pay any tax on it. 10% TDS is deducted for income above this.
There is no tax due to non-PAN
10% TDS is deducted by the bank if the interest income exceeds the fixed exemption limit. But if you have not given PAN, then the rate of TDS becomes 20%.
What to do if your total income is not covered by tax?
If the annual interest income from your savings account, FD or RD is more than Rs 10000, 40000 and Rs 50000 respectively but the total annual income (including interest income) is not to the extent where it is taxed then bank TDS is not deducted. . For this, senior citizens have to submit Form 15H in the bank and Form 15G to others. Form 15G or Form 15H are formed with self-declaration. In this, you state that your income is outside the tax limit. Anyone who fills this form will be excluded from the tax limit.
What is TDS?
If someone has any income, then after deducting tax from that income, if the person is given the remaining amount, then the amount deducted as tax is called TDS. The government mobilizes TDRs. It is deducted on different types of income sources such as salary, interest on any investment or commission etc. Any institution (which comes under the purview of TDS) which is paying, deducts a certain amount as TDS.