Fixed Deposits (FDs) enable you to fully access benefits under Section 80C, which allows you to claim a deduction of up to Rs 1,50,000 in a financial year from your taxable income for investments made in tax-saving fixed deposits or 5-year fixed deposits. Fixed Deposit interest income is entirely taxable. It will be added to your total income and taxed at the slab rates that adhere to your total income. Your Income Tax Return will indicate it under the heading "Income from Other Sources." The bank deducts this tax at the source when they credit the interest to your respective bank account and not after the maturity of your FD. If your income falls into the exempted slab, the bank will deduct tax at source if your interest earned is more than Rs 40,000 in a financial year from bank fixed deposits.
The quota for senior citizens is Rs 50,000 in a fiscal year. In the hands of the holder, bank FD interest income is entirely taxable, and banks impose TDS, which can be revised when filing the income tax return. Interest earned on bank fixed deposits is subject to 10% of TDS if PAN is submitted, in case the same is not submitted TDS will be deducted at 20%. Those who do not have an interest income more than the exempted amount can contact the bank not to subtract TDS. Typically, such confirmation is given to the bank at the start of the financial year by submitting Form 15G / Form 15H. Form 15H is for those over the age of sixty (senior citizens), and Form 15G is for anyone else whose net income does not surpass the statutory limit and is not subject to income tax.
Only those with income below the exemption limit outlined in the Income Tax Act can submit such forms. Income up to Rs 2.5 lakh is tax-free for those under the age of 60, and income up to Rs 3 lakh is tax-free for those over 60 but under the age of 80. Furthermore, those above the age of 80 have no tax debt up to Rs 5 lakh. For non-deduction of TDS on interest income earned on a bank FD, these individuals can submit Form 15G / Form 15H to their bank now. Since these forms must be submitted at the beginning of every financial year at the bank, you can fill out and submit the forms now at your bank if you want to avoid TDS in FY2022.