How To Save Tax and TDS On Fixed Deposits?

Posted on Wednesday, July 5th, 2023 | By IndusInd Bank

From investing in tax-saving fixed deposits to splitting your investments, several ways exist to optimise your returns and minimise your tax liabilities. Invest in IndusInd Bank tax saver FD today to avail of tax benefits.

Fixed deposits FDs are a popular investment option known for their guaranteed returns. However, many people tend to overlook the tax implications associated with FDs. The interest earned from FDs is considered part of your annual income and is, therefore, subject to taxation. While it is essential to fulfil your tax obligations on FD interest, strategies are available to minimise your tax liability.

Invest In a Tax-Saving Fixed Deposit

Investing in a tax-saver fixed deposit account is a highly effective approach to saving on taxes. With this opportunity, you can unlock the potential of substantial tax rebates totalling ₹1.5 lakhs per year, as specified in Section 80C of the Income Tax Act, 1961. To avail of these tax exemptions, you are required to maintain your deposit for at least 5 years.

Key Considerations for Investing in Tax-Saving Fixed Deposits

When you invest in tax-saving FDs, you need to keep the following points in mind:

1. Tax-saving FDs are available only for individuals and Hindu Undivided Families (HUFs).
2. The minimum investment amount typically varies from bank to bank.
3. You can hold the FD in a Single or Joint mode. However, the tax benefit applies only to the first account holder if held jointly.
4. Tax-saving FDs come with a mandatory 5-year lock-in period.
5. Premature withdrawals and loans against the FD are not allowed on tax-saving FDs, so consider your liquidity needs carefully.
6. The interest on tax-saving FDs can be paid out on a monthly/quarterly basis or reinvested.
7. The interest earned is subject to TDS based on your tax bracket. For individuals, TDS is applicable if the total interest earned exceeds Rs 40,000 in a financial year. Under section 80TTB, senior citizens are eligible for an annual interest deduction of up to Rs 50,000.
8. Most banks offer higher tax-saving FD interest rates for senior citizens than non-senior citizens.

Smart Ways to Minimise TDS On Fixed Deposit Interest Rates

Implementing these tips can help you minimise the impact of TDS on your FD interest rates:

Submit Form 15G/15H:

If your total income falls below the taxable limit, you can submit Form 15G (for individuals) or Form 15H (for senior citizens) to your bank. These forms declare that your income is below the taxable limit, prompting the bank to exempt you from TDS deductions on your FD interest.

Split Your Fixed Deposits:

Instead of depositing a large sum in a single FD, you could consider splitting the amount across multiple smaller fixed deposits. This is because the TDS threshold limits on FDs are Rs. 40,000 for individuals below 60 years and Rs. 50,000 for senior citizens on one single fixed deposit, not across multiple deposits.

Invest In the Name of Family Members:

If you have joint accounts or family members who fall under lower tax brackets or are exempt from TDS, consider investing in FDs in their names.

Reasons You Should Opt for IndusInd Bank Tax Saver Fixed Deposit

IndusInd Bank’s tax saver fixed deposit is an excellent investment for individuals seeking tax savings. Here are some key benefits:

1. Easy Online Booking:

You can book your deposit in three steps – provide your Aadhaar and PAN details, complete a quick video KYC, and secure your desired amount.

2. Flexible Interest Payments:

You can customise your interest pay-outs; options include monthly, quarterly, half-yearly, yearly, or at maturity.

3. Attractive Interest Rates:

You can avail of best-in-class tax-saving FD interest rates.

4. Market-Independent Returns:

You can enjoy stable and predictable growth as your deposit remains shielded from market volatility.

Secure your savings and maximise tax benefits with an IndusInd Bank fixed deposit today!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.