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New TDS rules on fixed deposit interest (Budget 2015)

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Budget 2015 has made TDS rules on fixed deposit interest more stringent. 

Till now, TDS was deducted by bank or post office when the interest is more than Rs 10000.There was a loophole as the limit of Rs 10000 was calculated with reference each of the branch and not all the branches together. So many taxpayers were using this option to create FD in different branches of same bank, so that the interest per branch doesnot exceed Rs 10000 and thereby no TDS is deducted.

Now, in Budget 2015, this loophole is plugged.  The budget proposes to make this limit for tax deduction applicable in respect of deposits with ALL the branches taken together in case the bank or the Company has core banking solution.

So now you cannot escape the TDS even if you open your bank fixed deposits with different branches of the same bank in case the aggregate of the interest on all the deposits is likely to exceed the threshold limit as above as almost all the banks now have core banking solution.

Cooperative banks – Till now some of the cooperative banks were not deducting tax on interest on fixed deposits from members. The present budget proposes to make the interest credited by the cooperative banks to their members also subject to TDS.

TDS on Recurring Deposit (RD) –  One more change which will affect you all in the TDS space is that presently the interest on recurring deposit (RD) are not subject to TDS. The budget proposes to apply the TDS law to interest on recurring accounts also.

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please comment below

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46 comments

  1. Amit Prakash Kulkarni

    I have made the fixed deposit in my son’s name of Rs 2 Las. My son is of 2 years old. My income is 2.50lacs per annum. Bank has updated form 60 for my son and pan in my name. Can I submit form 15g in my son’s name?

  2. i have a bank account SB and a Fixed account in SBI. the interest earned from the savings account is 5000 per year and the interest earned from the FD is 11000 per year. so pls tell me, on how much amount do i have to pay tax?

    • Hi Keshab,

      You need to show rs 16000 as Income from other sources.
      then you can claim deduction u/s 80TTA for Rs 5000 (as Upi get deduction for Saving Interest upto Rs 10000)
      FD interest is fully taxable and no deduction is available. As it is more than Rs 10000, bank may already deduct TDS on it.
      You need to show that TDS amount in your income tax return also.

      If you are not sure if the bank has deducted TDS, please check with your bank and also check your Form 26AS
      http://wealth18.com/check-or-view-your-tax-credit-form-26as-online/

  3. i recieve rs 20000 interest from two fd who was in two different bank is there any tds bank deduct

    • TDs will depend on the Interest amount in that bank. If the interest in 1 banks, is Rs 10000 or more, TDS will be deducted.

  4. I have 6 FDs and my recent 2 FDs which pays out monthly interest shows that TDS of 20% is being cut. My CTC is 3 LPA and I earn around 15k a month using freelance work.

    Let me know how I can reduce this. I am new to taxation as last year I was earning below 2.5 LPA so never paid heed to it.

    • Hi Abhishek, It seems that you have not given PAN number to you bank, and thats why they are deducting TDS @20%. You should give them your PAN, so that 10% TDS will be deducted.

      You can then claim this TDS amount while filing the income tax return.

      TDS @10% is deducted y bank, when the interest in a financial year is more than Rs 10000.

  5. Since same bank deposit in diffrent branches above the threshold limit is taxable, I have not submitted form 15H in April 2015, so banks would have deducted TDS upto june 2015, Can I now submit form 15 H on july 1st 2015 so the Bank do not deduct TDS.. My bank says it is not possible if not submitted in April 2015.
    Please Advise

    This are deposits of my father who is retired and Senior Citizen Aged 85 yrs

    • Form 15H needs to be deposited at the start of year or when the FD is created. As the TDS is deducted in 1st quarter, you cannot now submit 15H.

      But donot worry, you can always file the return online and claim the TDS refund. if you file the return online, normally the refund is credited within few months.

  6. Hi vivek,

    My father ia farmer and he put 5 lacs in FD on middle of april 2015 with form15G. and he planning to put one more 5 lacs to another bank FD on coming november 2015. he is having only agriculture income. so please let me know he has to really file it return?. and tell what happens if he put more money in FD with in a financial year? is there any limit for TDS?.

    • Hi Kumar,

      If the interest is more than Rs 10000 per year, TDS is deducted.
      Form 15G is only allowed provided your total interest in that financial year is less than Basic exemption limit for Rs 2.50 lakhs.

      How much is his agricultural Income.

      • Hi Vivek,

        My father’s agriculture income is less than one lac per year.so his total income including the FDs interest is less than 2.5 lacs per year. is there any rule like if you deposit more amount (in my case 10 lacs) in a FD with in a financial year do we have to fill it return like that..?

        • There is no such rule. But if you deposit FD of 2 Lkah or more or TDS is deducted, then you may get compliance notice.

  7. Hello vivek,
    I have read your articles and your comments on few questions and seems very happy to see your helping nature. Sir I have a question on tds deduction on fd. Sir I had deposited an amount of ( 1,24,972rs ) on for a fd of term 3 years on behalf of my sister name and after 3 years this amount should be ( 1,62,026rs ) at a rate of 8.75perannum . The period was from ( 12-05-2012 ) to ( 12-05-2015 ). Now when we go to bank for renew this fd an amount of 8,000rs was deducted as tds since we have not submitted pan no and also not 15g form. My sister is a house wife with no income. Kindly help me to get that amount back.
    Thanks

  8. Hi Vivek,

    This is ramya . I am recently married and my father gave 20 lakhs to me as a marriage gift. My husband is working in software company and his salary is 8 lakhs per year. if we do fixed deposit of all the money in my name do i have to file IT return?. I heared from my friend the interest from the FD will be added to my husband’s income and he has to pay tax for it. Please help us to know how to avoid the tax if i do FD. The money given to me by my father is all agriculture income.

    • Hi ramya,

      As the money is give by your father, the income will not be added to your husband.

      You will be responsible for any tax. If you make FD of Rs 20 lakh and donot file return, you will get tax compliance notice.

      So it is better to do the FD, file Form 15G/H in the bank for non filing of TDS. Also fiel the income tax return even if the income is below taxable limit.

  9. Hi Vivek – Thank you – Very informative Article. I have FD returning 8000 Interest PA and RDs all together are giving interest of above 5000 altogether annually. All the deposits were in same bank (HDFC) which has core banking facility.

    How the interest amount is calculated will they sum up interest from FDs and RDs ? Or Are they considered seperetely ?

    • Interest on FD & RD will be considered separately.

      TDS will be deducted if individually the amount is more than RS 10000

  10. Hi,I have invested in tax saving FD in SBI for last 4 years, and this AY SBI has deducted a tax amount of Rs1027 and has mentioned the “Total amount Paid/Credited” as Rs 9551. Please tell me why bank has deducted the tax while the interest is less than Rs 10000?
    Also, my salary is 7.8 lpa , So can i get back the TDS if I submit Form 15 G to the bank?

    • Hi Deepa,

      Please check with your bank why TDS is deducted. I think it may be possible that Interest earned is more than Rs 10K and after TDS deduction Rs 9551 is paid.

      You cannot file Form 15G as you will not be eligible. You need to show the total Interest in your IT return and also show the TDS amount deducted. Any excess tax will be refunded or any payable tax needs to be paid.

  11. Hello,

    My wife and I have a joint savings bank account. I am the primary holder and she is the secondary holder. She is a housewife with no income. If we open a joint FD with her as the primary holder, will the interest income be considered as her income? If she submits form 15G, can we avoid the tax?

    • Hi Harshad, Interest and TDS is applicable for the primary holder. If she has no other income, you can submit form 15G.

      Note that any Income on amount transferred to wife without consideration, will be clubbed to your income. and you need to show that in your Income tax return. Many people give loan to wife agaisnt jewellery etc to avoid the clubbing provisions.

  12. Hi Vivek,

    What if FDs are done in different banks and in each bank we get less Rs.10000 interest but total interest is crossing Rs.10000. Please clarify both cases where PAN is given and not given to banks.?

    Thank you.

  13. If i make fd in different bank like pnb,hdfc,sbi and then i earned interest 9000in each bank fd then is it taxable???

    • Hi Nidhi,

      FD interest will still be taxable and you will need to show the income in your tax returns.

      It is just that the TDS will not be deducted by banks (if interest in each bank is less than 10000)

  14. Hi Vivek,
    My interest from all FD’s of Citibank for this finacial year is Rs 10480.
    And by mistake did not submit Form 15G
    Now according to the 10% rule, my TDS is Rs 1048 (10% of Rs 10480) or Rs 48 ( 10% of the amount exceeding rs 10,000)

    Thanks in advance
    Good Day.

  15. My brother gave me 30 lakhs rs. i’m house wife. i don’t have any additional income. Can i put that money to FD. do i need to pay taxes as per slab? if you calculate @ 8% interest it comes around yearly 2,40,000. As per Tax slab it should be 2,50,000. So i don’t have to pay tax right.

    • Hi Girish,

      If the total Income is below tax slab, you donot have to pay any tax. But as the FD amount is large, you should file Income tax returns otherwise you will get compliance notice.

      Also, as the interest will be more than 10K, Bank wil deduct TDS. To avoid this, you can submit Form 15G to the bank.

  16. Hy vivek sir,

    I am NRI account holder and I keep 30 lakh FD for my wife name and 30 lakh for my name. How should I got benefit from tax. And which is better option for my next FD for my wife name or my name?

    Is it other option apart from FD?
    Don’t have any other income in india.

    Please guide me
    Thanks
    Ali

    • Hi Ali,

      The FDs are in which type of account? Is is NRE account or NRO account or Indian Savings Account?

      FD in NRE account is tax free and no tax or TDS is applicable.

  17. Hi Vivek,

    I have savings a/c in sbi and also have some fixed deposit in the same branch. Now, while deducting tax on interest (if >10000/yr) whether they will count cumulative interest from both the a/c and then deduce or they do the same counting individually.

    • Hi Tushar, TDS is not appliacable on Saving Account Interest.
      Bank will consider FD interest only.

      However, please note that all interest (FD & SAving) needs to be shown in Income tax return. For Saving interest, you can claim deductionupto Rs 10000 u/s 80TTA.

  18. I want to deposit as fixed deposit in bank of India 1.5 lakh in this month of February ,2016. will it cover two financial year & deduct the TDS?
    Reply.

    With Regards,
    Somnath Das.

    • TDS will only be deducted in the year in which Interest is more than 10000 for that year. So in Mar 2016 no TDS will be deducted.
      TDS will be deducted only in Mar 2017.

  19. T K Chattopadhyay

    I made a FD for Rs 1,50,000/- @ 8.05% pa on 31.03.2016 for 555 days. Can Bank recover TDS on interest for the day 31.03.2016 only in the year 2015-16

  20. I am working in a school in Srinagar Kashmir, our provident fund account is managed by ourselves ie, we deposit the both contributions into our cpf a/c monthly and makes FD on that. Erlier bank was not deducting TDS on Interest of FD of CPF. but now they are deducting tds. is the exemption of tds on fd of CPF changed? what is the new rule? Please help.

  21. I have make an FD for Rs. 50,000/- at the rate of interest 7.5% for 13 months and 7 days. Is there any tax will be deducted ? Should I submit form 15H or Form 15G to the bank. Although I will get the interest less than 5000. Please guide

    • As the FD interest is less than Rs 10000, no TDS will be deducted. There is no need to submit Form 15G/H.

      The annual threshold of Rs 10000 is for all FD interest with that bank.

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