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How I can save TDS on FD interest

Investments | Views: 9 | Comments: 0

TDS on FD interest with bank/ post office is deductible if the total amount of interest in a financial year exceeds Rs. 40000 (in case of senir citizen 50000) per bank / post office including all the branches. We can save TDS on
FD Interest by the following ways:

1. Submit 15G/ 15H
We can submit form 15G /15 H to the bank if our total taxable income is below 2.5 lac i.e. taxable limit, this limit is after deducting all the deductions & exemptions available.
form 15G is for all the individuals, 15H is for senior citizens.

2. Split FD in different banks: -
Since TDS on FD interest is bank wise (including all branches), to avoid TDS deductions we can split FDs in different banks so that our interest on FD in a financial year in a bank does ot exceed 40000 /50000.

3. Split FD in different names :-
If you have already money lying in different family members bank account, it is always advisable to do FD in their bank account only so that the limit of 40000 / 50000 per year per bank may not hit & you can avoid tax deduction on FD.
If the money is in one account, you can still split it in your close members like kids or spouse account for FD so as to avoid TDS deduction on FD interest but this will not save your overall tax liability because in that case clubbing provision will attract.

4. FD with Post Office:-
You can do some FDs in post office also it also carries same limits of 40000 / 50000 per person in a year.

5. Choosing right time periods for FD:-
If we choose middle or end of financial year so that interest of 1 year gets split into 2 financial years so that our TDS limit on FD interest of 40000/50000 per bank/post office will not hit & we can avoid TDS deduction on that FD interest amount.

For example if we have a FD of 10 lacs for a year with interest rate of 7% p.a., if we make deposit at beginning of year say at 1st Apr, bank will deduct TDS on accrued interest of entire 70000 at 10% i.e 7000, but if we make FD at mid of the year say at 1st Oct the accrued interest for 6 months in first year would be 35000 & in next year also it would 35000, so in both the year we would be below TDS applicability limit on bank interest & we can get entire 70000 in our bank as FD interest without TDS deduction.

Date Posted 13-Dec-2019
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