Save Tax on Fixed Deposits - Banks that Offer the Best FD Interest - Loan Trivia

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Tuesday, 27 September 2016

Save Tax on Fixed Deposits - Banks that Offer the Best FD Interest


No matter what Fixed Deposit scheme you have, Tax-saver FDs are one great option to take advantage of the exemptions offered under Section 80C, especially if you have a high FD interest.

Assuming you are in India,go through the following points to make things clear :
  • Tax is applicable on the Income that you earn in India during a financial year.
  • In case of Fixed Deposits,the interest earned is your Income.
  • Banks deduct TDS at 10% if interest on FD is greater than Rs.10000 during a financial year.
  • So,if you invest a particular amount in fixed deposit,taxability does not arise at this point.
  • But,the amount for which you are getting the FD made might have accumulated from some source earlier.e.g.some money received from sale of property or any other source. So,it might have already been included in your income in the form of capital gain etc.(as applicable).

To simplify,you might have already paid taxes on that amount as applicable.
Interest on FD forms part of your “Income from other sources”.This income forms part of your total income.The tax is calculated on your total taxable income as per Income tax slab rates. So,if you fall in the higher tax bracket say 20% or 30% you will have to pay extra taxes on your income(including interest on FDs).
Anyways,you should be able to justify the source of money if need arises.Big transactions usually get noticed and you should have proper justification as to from where you got the money.
Moreover,keeping all your money as Fixed deposits won’t fetch you high returns in the long run. So,diversifying your funds in other some other investment options like PPF,ELSS,mutual funds etc.might help you earn higher returns based on your risk horizon,investment period and financial objectives. So before investing your money you need to know about all taxation rules for fixed deposit.

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