Every year we plan our tax as per the income tax slab and deductions of that particular assessment years. But we always have some confusion, which investment is good to get deduction under section 80C. Here, we’ll talk about one of the most popular investment about fixed deposits comes under section 80C. You can get the complete detail like maturity period, interest, pre & post-tax return and overall overview.
The concept is very simple and clear that invest in “Fixed Deposit” for five years and get deduction from Gross Total Income up to Rs.1,50,000 (AY.2017-18) & (A.Y.2018-19) along with PPF/LIC/NSC/ULIP.
Any individual/HUF can open an account of Fixed Deposit in any schedule bank, in his own or Karta’s name single or jointly with another adult/minor individual (joint holder type) on either or survivor basis.
The deposit should not be less than 5 years. Suppose if the maturity period is less than 5 years then you can not claim deduction under section 80C. The premature encashment is not permitted. However, in the event of death of the first holder, the other joint holder may encash the deposit before its maturity.
You should have no confusion about the account holders name. As there is no restriction to hold account as single or joint. You can also have the nominee for the same account. The transfer of fixed deposits/term deposits between branches is also eligible except from one bank to another bank.
Interest on FD
The interest will be added in your gross income and taxable as per the income tax slab of that assessment year when it credited or paid. The bank will also deduct TDS if your income is taxable and it will be deductible and refundable as per the income tax rules. The interest shall be payable monthly/quarterly, or in lumpsum on maturity.
Pre & Post Tax Return
As you know the interest on FD will be taxable so you have to know the post tax return on Fixed Deposit. If you are getting interest on FD is 8% and you come under highest tax bracket i.e. 30.9% then the actual post tax return is 5.528%. In India, we’ll talk much about post-tax return. So you must consider this aspect also while investing in fixed deposit to get deduction under section 80C.
TDS on Fixed Deposits
In case the interest income on the F.D is more than Rs. 10,000 per year then the bank has to deduct TDS on interest income @ 10% if the individual submits PAN to the bank. Limit of Rs. 10,000 is to checked per bank per individual. So there may be case that an individual may receive interest from FD of more than Rs. 10,000 but from different banks then in that situation no TDS would be deducted.
In case the individual fails to submit PAN to the bank, TDS @ 20% would be deducted on the interest income of more than Rs. 10,000.
Example: A earns Rs. 15,000 as interest from bank FD. If A submit PAN to the bank then Rs.1,500 would be deducted as TDS but in a case A fails to submit PAN then Rs.3,000 would be deducted as TDS.
Is it Possible to Avoid TDS on FD Interest?
There are some cases where even the interest income is more than Rs. 10,000 and there will be no deduction of TDS by the bank. In these cases, the taxpayer has to submit the Form 15H and 15G as introduced by the government. As per the provisions of income tax law, if an individual submits Form 15G/ 15H to the bank declaring the NIL or lower deduction of TDS, the TDS in those cases will be deducted at the lower rate as specified.
Note: Validity of these forms is 1 year i.e. every year an individual has to submit the form again.
Refund of TDS on FD
If the net tax liability of an individual is NIL but there has been deduction of TDS by bank on the interest income, then an individual can claim the refund of the TDS deducted by filing ITR. TDS certificates i.e. FORM 16A can be taken from the bank and also can check the TDS deducted in Form 26AS which is available on the Income tax website.
Rates of TDS on FD
|Type of assesse||TDS (%)|