How to Report Advanced Tax on Interest from Fixed Deposits in Your Income Tax Returns

Understanding Tax Deducted at Source (TDS) on Interest from Fixed Deposits

Interest earned from fixed deposits (FDs) is subject to tax in India. Previously, a TDS limit of Rs. 10,000 applied to the interest earned from fixed deposits. However, post the Union Budget of 2019, the government increased this limit to Rs. 40,000. If the interest amount exceeds Rs. 40,000, TDS will be applicable at a rate of 10% on the income.

It's essential to note that if a PAN number has not been provided, TDS will be deducted at a higher rate of 20% on the interest income.

Taxable Interest on Savings Bank Accounts

Interest earned from savings bank accounts is generally not subject to TDS. However, just like interest on fixed deposits, it must be reported in your income tax return based on your overall income and tax slab.

Tax on Post Office Deposits

The tax rate applicable to post office deposits is the same as that for fixed deposits. If the interest income is taxed, it is typically subject to TDS at 10% on the income.

Tax Rates Applicable to Interest Income

Even if TDS is not deducted, the interest income from fixed deposits and other deposits must be included in your income tax return. It will be taxed according to the tax rate applicable to your overall income. For instance, if your total income before including interest from savings is Rs. 850,000, any interest earned from savings will be added to this amount and taxed at the applicable rate, which in the financial year 2019-20, if your overall income falls within the 5 lacs to 10 lacs bracket, will be 20%.

Exemptions for Interest Income

Section 80TTA

The Section 80TTA allows for an exemption of Rs. 10,000 from interest earned on savings accounts. While this amount is exempt from tax, it must still be reported in your income tax return. The relief from tax applicable under Section 80TTA can be claimed up to Rs. 10,000.

Section 80TTB

Interest from both savings accounts and fixed deposits, up to Rs. 50,000, is exempt for senior citizens under Section 80TTB. Additionally, interest earned from post office deposits is also exempt under this section, provided the depositor is a senior citizen. However, this exemption must still be claimed and reported in your income tax return.

Steps to Report Tax on Interest from Fixed Deposits in Your ITR

Even if TDS is deducted, it's important to file your income tax return (ITR) correctly. Here's how you can do it:

Log into theIncome Tax Department's official portal or e-filing portal. Provide all necessary details as prompted by the portal, including your personal information and financial details. Report the interest earned from your fixed deposits along with any other income sources. Claim the amount of tax deducted as a tax credit. Submit your ITR form on time to avoid any late fees or penalties.

By following these steps, you ensure that your tax liabilities are managed accurately and in compliance with Indian tax laws.

Conclusion

Report your advanced tax on interest from fixed deposits correctly in your income tax return to avoid any penalties. Understanding the tax implications of your fixed deposits, including TDS, exemptions, and overall tax slab, is vital for managing your tax obligations effectively.