TDS or tax deducted at source is a type of tax, that, as the name suggests is deducted at source. Here the tax is deducted on a percentage of your income like professional fees or interest. Under section 194A, TDS is deducted on interest payable like interest on fixed deposits (FDs) and interest paid on unsecured loans. For example, in the case of FDs, interest income is taxable if the interest exceeds Rs 40,000 for citizens below the age of 60 and Rs 50,000 for senior citizens. TDS is deducted at the rate of 10 per cent. However, if you have not provided your Permanent Account Number (PAN) details to the bank, TDS will be deducted at 20 per cent. Remember TDS is deducted as long as the interest is credited to their account irrespective of whether the customer withdraws it or not.
Here are the threshold limits for all kinds of payees whether it is banks, cooperative banks, post offices providing interest on deposits, and so on.
However, for interest on deposits with NBFCs, the interest threshold is Rs 5,000. It should be remembered that TDS is deducted when the interest is credited and not when the FD matures.
How To Avoid Paying TDS If Your Income Is Less Than Rs 2.5 Lakh
If your total income, including interest income, is less than Rs 2.5 lakh in the old tax regime, you do not need to pay any tax. However, for this, you need to submit Form 15G ( for those below 60 years age) and Form 15G ( for senior citizens). Remember, these forms are self-declaration forms and need to be submitted to all the bank branches from which you are receiving interest requesting them not to deduct TDS as your income falls below the threshold limit.
These forms need to be submitted at the beginning of each financial year. Otherwise, you may face an additional TDS deduction and go through the refund process to claim a refund.
Another way of paying less TDS is opening FD accounts in the name of your family members who may not have an income. In that case, they might be exempted from TDS or have to pay less TDS.
How To Calculate TDS On Interest Income
You may ask your bank if you need to pay any TDS on interest income. There are also many online calculators that will help you calculate the TDS you need to pay on interest income.
