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Hardik

Hardik Parikh  | Answer  |Ask -

Tax, Mutual Fund Expert - Answered on Jul 26, 2023

Hardik Parikh is a chartered accountant with over 15 years of experience in taxation, accounting and finance.
He also holds an MBA degree from IIM-Indore.
Hardik, who began his career as an equity research analyst, founded his own advisory firm, Hardik Parikh Associates LLP, which provides a variety of financial services to clients.
He is committed to sharing his knowledge and helping others learn more about finance. He also speaks about valuation at different forums, such as study groups of the Western India Regional Council of Chartered Accountants.... more
Asked by Anonymous - Jul 26, 2023Hindi
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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.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Moneywize

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Asked by Anonymous - May 26, 2024Hindi
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I have submitted my Form 15 in April 2023 as my income is below taxable income against interest received on my bank FDs. Bank has not deducted any TDS up to September 2023 but from October 2023 started deducting TDS on FD interest saying that interest on FDs has crossed the limit of 5 lakh. So as per IT rules should TDS be deducted?
Ans: You're right. Based on IT rules, TDS on FD interest might not have been applicable in your case. Here's a breakdown:

• TDS on FD Interest: There's no TDS deduction if the total interest earned from all your FDs with a bank is less than Rs 40,000 in a financial year. This limit is Rs 50,000 for senior citizens (aged 60 years and above).
• Form 15G/15H: By submitting Form 15G (for individuals below 60) or 15H (for senior citizens) in April 2023, you declared your income to be below the taxable limit. This should have exempted TDS on FD interest for the entire financial year (April 2023 - March 2024).

Possible Reasons for TDS Deduction:

• Crossed Interest Limit Misunderstanding: The bank might have mistakenly considered the total interest earned across all your FDs for the entire financial year (April 2023 - March 2024) and deducted TDS once it exceeded Rs 40,000 (or Rs 50,000 for senior citizens) from October 2023 onwards.
• Form 15 Not Processed: There's a chance your Form 15G/15H wasn't processed correctly by the bank.

Resolving the Issue:

• Contact the Bank: Reach out to your bank's customer care or branch manager and explain the situation. Mention you submitted Form 15G/15H and your income is below the taxable limit.
• Provide Documents: If needed, share a copy of your Form 15G/15H submission proof.

The bank should investigate and potentially reverse the deducted TDS.

Additional Notes:

• It's good practice to keep a copy of any forms submitted for future reference.
• If you still face issues, consider seeking guidance from a tax consultant.

..Read more

Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 07, 2025

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I renewed a FD with ICICI bank on 4.2.25, due on 1.3.26. I wanted premature closing the FD on 6.2.25. The FD was with the bank for 2days only and the bank is not paying any interest on it (also there is no penalty). The bank has told me that TDS will be deducted on the interest which was to be paid on maturity. The bank is not paying any interest so why deduction of TDS. Thanks.
Ans: The bank's approach seems incorrect. Since you are prematurely closing the FD within two days, and no interest is being paid, there should be no TDS deduction.

Why This Doesn't Make Sense:
TDS is deducted on interest earned, not on notional interest.
If the bank has not credited any interest to your account, there is no income to deduct TDS from.
Banks usually deduct TDS at the time of credit or payment of interest, not based on future projections.
What You Can Do:
Ask for Written Clarification: Request the bank to provide a written explanation of why they are deducting TDS despite not paying any interest.
Check Form 26AS Later: Ensure that no TDS is actually reflected in your Form 26AS. If deducted, it can be claimed in your ITR.
Escalate to ICICI Grievance Redressal: If the bank insists on deduction, escalate the matter through ICICI’s grievance process.
Approach Banking Ombudsman: If unresolved, file a complaint with the RBI Ombudsman for unfair TDS deduction.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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