Fixed Deposit Taxation: Know Why Proper Understanding is Key to Your Income Tax Returns

Returns on Fixed Deposit (FD) is considered as an income. You maintain a certain amount for fixed deposit in your bank and you can earn returns for the time period who have invested, for example 6 months or for one, five or even ten years, at an interest rate.

For those looking for security and guaranteed returns, fixed deposits are a preferred investment vehicle. Your yearly income includes the taxable interest earned on an FD.

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Since the interest received on Fixed Deposits (FD) is completely taxable under the head income from other sources, it’s important to have a solid grasp of the tax implications of FDs in order to submit an accurate income tax return, according to the reports. Many get confused about whether it is taxable or not, so let’s understand why it is taxable and what you should know before filing the ITR.

If the interest generated by an FD during a financial year exceeds a certain threshold, banks are obligated to deduct TDS. Regardless of whether the bank deducts TDS, you must declare all of your interest income in your Income Tax Return (ITR). You can get a tax return from the government if the total amount of TDS deducted during the year is more than your last tax obligation. On the other hand, you might have to pay the remaining tax sum if the TDS is lower than your tax liability.

Interest from FD is subject to TDS if it exceeds Rs. 40,000 for individuals under 60 and Rs. 50,000 for those over 60. The tax deduction rate is 10%.

Having a full understanding of the topic lets you correctly calculate your tax responsibility.