The income earned from your fixed deposit is considered as ‘Income from other sources’, in matters of income tax. This means that your total taxable income for one financial year is inclusive of your FD income.
However, before you proceed to pay tax on your income on the basis of your tax slab rate, you must understand the Tax Deducted at Source (TDS) on your FD earnings in detail. This is a tax that an FD issuer deducts from your earnings to submit to the government on your behalf.
Hence, when filing returns before the deadline of August 31, 2019, here are a few considerations you need to keep in mind.
Understand TDS thoroughly
In certain cases, when you receive finance, tax is deducted at source by the issuing authority. In case of a company FD, for instance, the issuer levies TDS at 10%, which it then hands over to the central government.
If your PAN details are not available with the issuer, it levies TDS at 20%. However, TDS is applicable only when your annual earnings from FDs cross a certain limit. TDS isn’t applicable on bank and post office FDs where earnings are up to Rs.40,000 per year. For NBFC FDs, this threshold is Rs.5,000.
Keep tax-saving FDs in mind and plan ahead for the new financial year
According to Section 80C of the Income Tax Act, you can claim a deduction of up to Rs. 1.5 lakh basis your investment in tax-saving bank and post office FDs that come with a lock-in period.
Should you choose such an FD, project your earnings for the new financial year keeping the past year’s ITR in mind. With a fair idea of your income, you can tune your investments in tax-saving FDs in order to claim maximum exemptions under 80C.
Save as per your tax slab
When calculating your total taxable income, add your FD income as well. To determine this, you can actually use an FD calculator beforehand. This will help you determine your tax slab and tax obligation in advance. With this handy information you can increase or decrease the principal for your FD so that it does not increase your taxable income. In doing so, you will be able to save on tax and earn high returns too.
These 3 pointers showcase just how well FDs can be used to save tax. By keeping these tips handy, you can make the most of the deductions available to you when you file your ITR.
To enjoy excellent returns from your FD, it is important to pick a trustworthy issuer such as Bajaj Finance. The Bajaj Finance Fixed Deposit offers some of the highest interest rates in the country, up to 8.95% for senior citizens and 8.6% interest for regular investors, when you take an FD of at least 36 months with interest payable at maturity.
To understand the returns in store, assume that you invest Rs.30 lakh in a 5-year FD. Based on your customer profile the interest rate will vary as follows.
As a new customer, here is what you will earn
Moreover, with ICRA and CRISIL’s highest ratings, this FD promises timely payment of your maturity sum. Apart from this, note that you can apply for this FD online and monitor your investment through a secure customer portal thereafter. To start investing you need as little as Rs. 25,000.
Additionally, to make your investment even more beneficial, Bajaj Finance permits premature withdrawals and allows you to avail a loan against your FD of up to Rs.4 lakh in case of emergencies. You can also enjoy deposit benefits, as you can make deposits to multiple FDs via a single cheque and choose a tenor of 12 to 60 months for each FD as per your convenience.
These benefits and tax savings make FDs an integral part of any investment folio. So, fill a short online form and start earning high returns today!