Introduction

When managing your fixed deposits and considering the tax implications, it is crucial to understand whether you need to declare them each year or during the year when they mature. This article provides a detailed guide on how to handle fixed deposit investments for tax purposes, focusing on interest income, TDS (Tax Deduction at Source) and exemptions based on income levels.

Do I Need to Declare My Fixed Deposit for Each Year?

Whether you need to declare your fixed deposit investment for each year or only when it matures depends on the interest income you earn. You must declare only the interest income that accrues on your fixed deposit upon maturity. Your bank will deduct TDS if applicable and issue you a certificate. This information will appear in your 26AS and AIS (Annual Information Statement) forms.

For instance, if you made a fixed deposit this year, but the interest will be credited next year, you should not declare it in this year's tax-return unless the interest is earned and credited this year. However, you should be aware of the interest income that accrues from the fixed deposit made in previous years and will mature next year. It is important to ensure this information is included when you file your taxes for the relevant year.

Tax Liability for Fixed Deposit Interest Income

Interest earned from fixed deposits is considered part of your total taxable income. If you made a fixed deposit in last year but received no interest until this year, you do not owe tax for last year, but you will for this year. Therefore, it is important to track the interest income as it accrues, as pertains to the year in which it is earned.

Once the interest is credited to your account, it is considered taxable income. Typically, banks deduct TDS at the rate of 10% if your PAN details are provided. If you withhold your PAN, TDS can be levied at a higher rate of 20%. Additionally, if your fixed deposit interest exceeds ?40,000 (?50,000 for senior citizens), TDS can be deducted.

Form 15G and 15H: Requesting No TDS

For individuals in the higher tax brackets, it’s crucial to understand the options for requesting no TDS (Form 15G or 15H). If you are a non-resident or wish to avoid TDS, you can submit Form 15G for individuals below the age of 60 and Form 15H for individuals 60 years and above. These forms must be completed and signed, and submitted every year during the tenure of your fixed deposit with the bank.

To avoid TDS, you need to provide a narrative and assertion column in the form, confirming your right to non-deduction. It is advisable to declare this annually, especially if you expect to exceed the TDS threshold in any given year.

High Value Investments and SFT Reporting

For high-value investments, such as fixed deposits totaling ?10 lacs or more in a financial year, these fall under the scope of SFT (Short-term and Long-term Capital Gains) reporting in Form 61A. However, renewals of fixed deposits will not be included in such reporting, as they do not constitute a transaction that would require SFT analysis.

As a tax payer, there is no specific requirement to report fixed deposits directly when filing your income tax return (ITR). Your bank and the Income Tax Department will handle this work behind the scenes. It is important to keep track of all fixed deposit interest income for accurate tax declaration.

Conclusion

To summarize, fixed deposit interest income must be declared and declared based on the year in which the interest is earned. Banks handle the TDS and provide necessary certificates. Forms 15G and 15H are available for those seeking to avoid TDS, and high-value deposits require SFT reporting. Ensuring accurate tracking and declaration of your fixed deposit interest income is crucial for staying compliant with tax laws.

Keywords: fixed deposit tax, interest income tax, TDS deduction, income tax declaration, Form 15G and 15H