# A quick look at TDS calculation on interest income from Bank deposits in India

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To begin with you must understand the instrument that you are calculating the TDS on interest income for.

For example, TDS will be applicable over Rs 5000 for interest income on company fixed deposits. For bank deposits the same would be Rs 10,000.

Rate of TDS on bank deposits

Bank deposits in India attract a TDS of 10 per cent over and above an interest rate of Rs 10,000. For the purpose of determining the interest the bank takes into account the financial year.

So, they will take into account interest income earned from a bank fixed deposit from April 1, 2014 to March 31, 2014.

The TDS rate on a bank fixed deposit is 10 per cent. In addition to this there is an education cess of 3 per cent that is applicable on the 10 per cent. This takes your total TDS from the fixed deposit to 10.3 per cent.

How to calculate TDS on interest income

Let's us cite this with an example. Let's assume that you have a deposit of Rs 1.2 lakh and the bank gives you an interest rate of 10 per cent annum.

You are likely to earn an interest income of Rs 12,000. On this the bank will deduct a sum of Rs 1236 at 10.30 per cent.

It's important to note that the bank will not take into account the amount in excess of Rs 10,000, but on the entire amount of interest earned.

How can you save on TDS on bank deposits

You can save on TDS on bank deposits by simply handing over form 15g or form 15h. To read more on how to hand over form 15g or 15h, please click here

These forms have to be submitted only when you are not liable to pay income tax. That is when your income does not exceed the taxable limit of Rs 2.5 lakhs currently for individuals and Rs 3 lakhs for senior citizens.

Conclusion

Always calculate the amount of TDS that you are liable to pay on interest income. This would help you plan your deposits better.

For example, you would like to put two deposits one in your name and one in the name of your family member.

Let's say you plan to invest Rs 2 lakhs. You can split the deposits into Rs 1 lakh each between you and your wife. This way you would not be able to pay TDS.

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