Statistically speaking, today, more than 95% of the Indian working class tend to park their money in either fixed deposit or savings account. But, not many of these individuals know that the money parked in a fixed deposit is taxable too.
Parking your money in fixed deposit is by far the safest and one of the oldest way to keep your money and to an extent grow it too. The regular interest received to act as a mini-income to the investors, which is why most of the working class prefer fixed deposit over most saving instruments.
If you are someone who has park their finances in a fixed deposit, we reveal some truth about FDs that you should know. Read the article for more; you can thank us later.
- Tax benefits:
Under the Section 80C of the Income Tax Act of India, if an individual or HUF has invested in a Bank fixed deposit for five years of Rs. 1,50,000 then, they can use this investment to claim Tax exemption. However, before investing in any fixed deposit or any financial instrument, it is crucial to know if they are tax eligible. Many FDs do not fall under the bracket of Section 80C and investors will have to pay taxes.
- Income via interest:
Interest received on FDs can be treated as income. However, this income is taxable concerning the annual accrual or the receipt, whichever mode of account you follow. The interest income on the bank FDs on an earning up to Rs. 50,000 by a senior citizen is waivered, according to Section 80TTB of the Income Tax Act.
- TDS deduction:
The banks deduct tax up to 10% on the income received via the interest rate of the fixed deposit. This tax is deducted at the source. Thus, you must take care of filing the appropriate tax credit during the return of income. If you declare interest income based on receipt basis, then you should not carry forward claimed tax credit in the same year as the taxed income on the receipt basis.
These points fit well if you plan to buy a bank fixed deposit. In case you opt for a company fixed deposit then, there is a different procedure and rules that you need to follow. Once you adhere to these rules, you will be able to enjoy the benefits that are offered by the company fixed deposit, too.