Tips That Can Help You Save Taxes on Fixed Deposit

Arwind Sharma By Arwind Sharma, 22nd Feb 2017 | Follow this author | RSS Feed
Posted in Wikinut>Business>Investment

A fixed deposit can not only help you earn you extra money through fixed deposit interest rate, but tax benefits as well. Read on to know more.

Tips That Can Help You Save Taxes on Fixed Deposit

Fixed deposit can be defined as a financial investment where you invest your money in a bank for a fixed span of time in order to earn stable returns. There are several types of fixed deposit schemes available in India. The one you should go for is entirely dependent on your economic condition and individual goals. Most people invest their money in fixed deposit, but most aren’t aware of the fixed deposit tax benefits.

You can go for a regular fixed deposit where the FD interest rate is fixed and isn’t dependent on market fluctuations. This is the most common variant of fixed deposit, where the investor can get guaranteed, risk free returns and sees their capital grow. On the other hand, the tax saving fixed deposit is one that helps you to save income tax.

Generally, this type of funds is available for a period of 5 years. You cannot withdraw it before the maturity period. On the other hand, there are special tenure fixed deposit schemes where you can invest your funds for a special span of time such as 499 days or 555 days or 333 days. Here the FD interest rate is generally higher.

The interest that you earn through a fixed deposit is taxable under “income from other sources” under the Income Tax Act. Although the sum of money invested under 80C of the Income Tax Act is excluded, the interest that you earn from these investments is taxable. When your income from fixed deposit exceeds Rs.10,000 in one financial year, the income is deemed eligible for tax deduction at source. It’s calculated at 10% along with 3% education cess on the TDS. This totals 10.3 percent of the total interest earned.

Things You Can Do to Save Taxes on Fixed Deposit

Fortunately, you can save on taxes on the fixed deposit and take home the full amount of interest home. There are several ways of doing this.

Submitting Form 15G or 15H:

The 15G and 15H forms are devised by the Income Tax Department of India to help you to avoid TDS. When you fill in 15G form and submit it along with a photocopy of your PAN card, the respective bank won’t deduct any TDS charges on the earned sum of interest. In case you are over 60 years of age, you can fill up 15H.

Distributing The Investments:

You can also split your investments in a way that you can earn interest without having to pay taxes. Make sure that the total interest earned in a financial year doesn’t exceed Rs.10.000.

Timing The Fixed Deposit Properly:

This one is a bit tricky. You have to arrange fixed deposit schemes in a way that yearly interests earned don’t exceed Rs.10,000 in a year.

Splitting The Fixed Deposit:

You can start a fixed deposit under your own personal account and another under the Hindu Undivided Family heads. This ensures that both accounts are treated as separate. You can get a TDS rebate by dividing the investment under two heads.

Fixed deposit schemes are one of the most lucrative investment tools in India since it launched. Not only do they offer a handsome return, but they’re also easily liquidated when you need money urgently.

You can also go for fixed deposit tax saving if can strategize your investments well. When the volatility and high associated risks of investments are considered, fixed deposits are bound to remain the favourite investment scheme of the general population. This is because it offers a fixed interest rate that won’t be deterred under any circumstances.


Fixed Deposit, Money, Money Saving Tips

Meet the author

author avatar Arwind Sharma
Arwind Sharma a passionate writer on finance and closely associated with financial companies. He is still busy in discovering time-efficient finance schemes. To know more about Loan against

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