5 Ways to Easily Save TDS on Fixed Deposit

Fixed Deposit (FD) is an investment avenue preferred by investors across all classes for its safety, features, and assured returns. You enjoy high returns at the lowest risk with FDs.

Some Facts on Tax Deducted at Source (TDS)

  • Interest accrued on the fixed deposits is taxed under the head ‘income from other sources’ as per the Income Tax Act, 1961.
  • Note that the TDS is deducted on accrual of interest and not at the time of payment of interest. Even if the interest has not been paid to you yet, taxes are to be paid.
  • Just like other investments, Tax Deducted at Source (TDS) @7.5% is applicable to interest income from fixed deposits as well. If the PAN card is not submitted by the depositor, TDS will be @20%. For Non-Resident Indian investors, it is @30%.
  • FD issuers deduct TDS from the FD interest amount to be paid to a customer if it exceeds minimum limit i.e. Rs.40,000 annually (Rs.50,000 for senior citizens). However, this limit is Rs.5,000 for company FDs.

Good news is that you can save TDS with smart investing. Let’s find out how you can waive off TDS.

1. Spread FDs across different financiers

Let’s understand with an example. Suppose you have Rs. 1,40,000 and want to invest in a company FD for one year. Your FD return will be Rs.8,890 at 6.35% interest rate which is more than the maximum threshold of Rs.5,000. You have to pay TDS @ 7.5% on this interest amount. 

So, what you need to do is spread the investment amount Rs.1,40,000 in two FDs equally across two different companies. In this way, your interest income is Rs.4,445 with each company. As your interest is less than the maximum limit with each company, you need not pay TDS. Above calculations are performed using Bajaj Finance FD calculator.

2. Spread FD Across Financial Years

Invest your funds in such a way that the interest income in a financial year does not go above the maximum threshold of Rs. 40,000 (Rs. 50,000 for sr. citizens). You can open a 12-month FD account in Oct month instead of Apr because a financial year closes on 31st March every year and in this way, the FD interest will be split across two FYs and TDS can be avoided and you can make the most of fixed deposits.

3. Form 15G/15H

If your income is less than minimum tax slab limit for the particular year, you can submit Form 15G to claim TDS refund on fixed deposit interest. Senior citizens need to provide Form 15H.

4. Split FDs across different entities

An investor can start multiple fixed deposits on his name and on the name of his family members or under an HUF account. All FD accounts will be treated as separate accounts and save taxes.

5. Smaller Amounts

Depending on the amount you have for investment, you can split it into smaller deposits and deposit with different tenors or different maturities.

Why Bajaj Finance Fixed Deposit?

Bajaj Finance FDs assure you safety and security of your investment with highest credibility ratings – FAAA Rating by CRISIL and MAAA Rating by ICRA. Here are some of FD benefits with Bajaj Finance FD:

  1. High interest rate up to 6.85%. Additional interest rate @0.25% for senior citizens. With such high interest rates, you can easily offset the effect of TDS deduction on your interest income.
  2. Flexible tenor from 12 to 60 months.
  3. Periodic interest payouts facility is available with non-cumulative FDs.
  4. Easy online investment process for FDs at digitally-enabled FD branches.
  5. Doorstep document verification facility for existing customers
  6. Loan facility against Fixed Deposits. Apply for up to 75% of your FD account value.
  7. Invest an FD account with a debit card, multi-deposit, and auto-renewal facilities.
  8. Estimate your earnings using the Bajaj Finance FD Calculator before investing, It will help you to strategize your investments to save taxes.

Author Bio:

Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.

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