My interest on FD has been taxed at 10% TDS already . Why does it have to be taxed again during the return filing . Example of interest is 2 lakhs and TDS is 20000.

Ans: Hello there,

I understand your concern about the double taxation on your Fixed Deposit (FD) interest. Let me clarify this for you.

The Tax Deducted at Source (TDS) is a means of collecting income tax in India and is governed under the Indian Income Tax Act of 1961. When it comes to FDs, banks deduct TDS when your interest income exceeds a certain threshold in a financial year. As of now, this limit is Rs. 40,000 for non-senior citizens and Rs. 50,000 for senior citizens.

Now, coming to your question, the TDS deducted by the bank is not the final tax. It's just a part of the total income tax you're liable to pay for the year. The bank deducts TDS at 10% (if PAN is provided) on the interest earned, but your final tax liability could be at 5%, 20%, or 30% depending on your total income for the year.

So, when you file your Income Tax Return (ITR), you need to add the interest income from the FD to your total income for the year. The tax on this total income is then calculated based on the income tax slabs. If the total tax calculated is more than the TDS already deducted, you'll have to pay the difference. Conversely, if the total tax is less than the TDS, you can claim a refund.

For example, in your case, if your total income including the FD interest falls under the 30% tax bracket, you'll need to pay an additional 20% tax on the FD interest (30% total tax minus 10% TDS already deducted).

I hope this clarifies your doubt. Please consult with a tax advisor or chartered accountant for personalized advice based on your total income and tax slab.

Best regards.