As per the Income Tax Act, interest earned from savings schemes is treated as ‘income from other sources’. It is mandatory to provide all your income details while filing ITR. Many people are not aware that the interest earned from which savings schemes are tax free and which are not.
New Delhi. The last date for filing Income Tax Return (ITR) is 31st July. It is important to give correct information about your income while filing ITR. Many people are not aware that the interest earned on Savings Account, Fixed Deposit (FD) and Recurring Deposit (RD) also attracts income tax. A lot of people invest for savings in Fixed Deposits, Recurring Deposits and Provident Funds. This is because they consider investing in them easy, simple and safe.
As per the Income Tax Act, interest earned from savings schemes is treated as ‘income from other sources’. This is the reason that interest earned on savings accounts, fixed deposits and recurring deposits is taxed and the bank can deduct TDS. But, tax is levied only if the total income of the income tax payer exceeds the exemption limit (Rs 2.5 lakh per annum). Income tax payers can also reduce their tax liability with the help of section 80C, 80D of the Income Tax Act.
Tax on Fixed Deposit (FD) Interest
If the interest received by a common man on bank FD in a financial year is less than 40 thousand rupees, then no tax would have to be paid on it. On the other hand, senior citizens do not have to pay any tax on FD up to Rs 50,000. 10 percent TDS is deducted if income is more than this. If even after adding interest income from bank FD, your totalIncome TaxIf you stay within the exemption limit (Rs 2.5 lakh annually), then you get exemption from TDS.
Tax on interest from RD
If the interest income from Recurring Deposit (RD) is up to Rs 40,000, then no tax is payable to persons below 60 years of age. For senior citizens, this discount is up to Rs 50,000. Ten percent TDS is deducted on the excess amount.
Tax on PPF interest
PPF is one of the most popular safe investment channels. The reason for this is that with the safety of money, good interest is available in it, as well as no tax has to be paid on this interest. PPF deposits, interest and finally the maturity amount are exempt from tax. Hence it is a completely tax-free investment vehicle.
Form 15H and 15G have to be submitted
If the annual interest income from fixed deposits or RDs exceeds Rs 40,000 and Rs 50,000, but the total annual income (inclusive of interest income) is not to the extent that it is taxed, the bank cannot deduct TDS. For this, senior citizens have to submit Form 15H to the bank and Form 15G to others. Both of these are self-declared, through which it is told that the income of the person who fills this form is outside the tax limit.
