Why TDS on RD and FD?
Fixed deposits and recurring deposits is a financial scheme to save your earning and wages and make a big investment apart from your monthly salary. While you get good returns at a high rate of interest, fixed deposit and recurring deposit come with the drawback of taxes. Depending on the interest amount, the bank will deduct TDS (Tax Deducted at Source) from your account, but there are ways in which you can avoid TDS on RD and FD.
Ways by which TDS can be avoided on Fixed Deposit
- Submitting form 15G/15H – if the depositor submits form 15G indicating that he has no taxable income, then the bank will not have any authority to reduce TDS on the interest amount. Senior citizens will have to submit form 15 H to avoid TDS on FD.
- Distribute your FD investment – by splitting your fixed deposit into different banks, your interest amount will not rise above Rs.10,000 and thus TDS will not be applicable.
- Time your FD rightly – by timing your fixed deposit and calculating your rate of interest, you will get an idea about your maturity date and the interest amount you will incur. Time it in a way that interest for a financial year does not exceed Rs 10,000 thus helping to avoid TDS.
- Form a Hindu Undivided Family (HUF) account – opening a fixed deposit under an individual’s personal account and another under HUF account will be considered as separate. Hence, the depositor with HUF can form two accounts and split the value under two accounts, personal and HUF.
Ways by which TDS can be avoided for Recurring Deposit
- Open the account under family members – Opening a recurring deposit account under your father or wife, whose tax slab is nil helps get rid of TDS
- Open deposits in different banks – You can split the lump sum amount you wish to invest in two different banks, hence two recurring deposit account in two different banks.
- Submitting form 15G/15H – if your total income is under the basic tax exception limit, then you as a depositor may submit the form 15G to the bank and your TDS will not be deducted by them. Senior citizens who do not have an estimated monthly income, may submit form 15H and be exempted from tax deduction.
If in any case, the depositor have no tax liability then he/she can ask for a refund by filing the income tax return. Hence, it is always better to keep your eyes open and opt the various ways by which you can save your hard earned money. Though fixed and recurring deposits do give you good return, the tax liability always clings on, so adopting these methods can help you save more in future.
Recommended Read :
- What is Fixed Deposit?
- Fixed Deposit Vs Mutual Fund
- Bonds Vs Fixed Deposits
- Fixed Deposit Vs Non-Convertible Debenture
- How to Compare and Select Fixed Deposit Plan?
- How to Open Fixed Deposits for Nri?
- Fixed Deposit for Retired Citizens
- Callable vs Non Callable Fixed Deposits
- Loan Against Fixed Deposits
- How to get Loan Against Fixed Deposit?
- What is Tax Deducted At Source?
- How to Avoid Tds On Fixed Deposit?
- Main Disadvantages of a Fixed Deposits
- Premature Or Partial Withdrawal of Fixed Deposits
- What is Flexi Fixed Deposit?
- What is a Corporate Fixed Deposit?
- Benefits of Online Application of Fixed Deposits
- Who Sets The Fixed Deposit Rate in India?
- Importance of Tenure in Fixed Deposit
- What is Recurring Deposit?
- How Does Recurring Deposit Work?
- Guidelines and Minimum Amount to Open Recurring Deposit
- Millionare Fund Become a Millionare With Recurring Deposit
- Recurring Deposit a Good Regular Savings Habit in People
- Premature Withdrawal of Recurring Deposit Closing Rd
- Loan On Recurring Deposit
- What is TDS (Tax Deducted At Source)?
- What is Indexation?
- What is Tax Redemption?
- What is Capital Gains Tax?
- What is Education Cess?
- Tax Forms 15G 15H
- What is The Tax Impact On Gold Investments?
Getting rid from TDS in the given way will surely help people. Moreover it will help investors/common people who want to earn a good sum of money from maturity of FD and RD giving TDS.
Somehow one negative point is there that the amount of money if we want to split for relief from FD is 10,000.The the person who want to do fd of rs 2,00,000 then splinting into such low amount in different banks would be difficult.
Anyway , people who are investing low amount money can get benefited from this policy.
Whatever may be our income, whatever may be our savings; each of us would wish to save a lot and get rid of TDS. The ideas stated in the article will definitely help common man o make a lot out of the interest earned on Term Deposits- FD or RD. Since the methods stated are simple, they can be easily implemented.
Well written with easy flow and development, it was very interesting to learn about TDS, RF, and DF. The methods of avoiding TDS were very clear for both RF and DF, but would it be more understandable still if the methods for RF and DF were compared. I think some of their methods are the same, but rephrased.
This is a very useful blog. Some tricks and techniques might save a lot of pennies to earning families. I never knew that these types of tips ever exist on earth! The points quoted above could be understood easily as it was explained in simple language. This is a very clear blog that can be use as a reference. Nice write author!