Five Rules You Must Know Before Investing In Fixed Deposit


There are varied reasons why an investor decides to invest his surplus funds in a fixed deposit. It is common knowledge that FDs are a go-to-option for people seeking safety in their investment. Fixed deposits are one of the safest forms of investment. However, there are several rules that investors still are not aware of. Keeping the safety on one side, it is essential that as an investor you must have prior knowledge of these rules.
The majority of these rules are some enclosing points about Tax Deductible at Source and its impact on your savings through interest earned. FD investment is tax liable if your income crosses a certain limit. However, it is not a losing situation as there are ways through which you can save your interest income from being taxed. Moving on to the point.
Here are a few of the facts that you must enlighten yourself with when it comes to fixed deposit investment:
TDS without PAN: If the rate of interest that you earn on your FD surpasses the limit of INR 10,000 in a financial year then TDS will be deducted at an interest rate of 10%. However, in case you do not provide your PAN, TDS will be deducted at the rate of 20%. In fact, it is not just the fixed deposits but recurring deposits as well.
TDS with investment: Earlier, if your investment were spread in different branches, TDS would only apply to a single branch. However, that is not the case anymore as all your deposits are consolidated, and then TDS is applied. To make it simple, if the collective interest on FDs or recurring deposits made in one or more than one branch of the same bank exceeds INR 10,000, TDS will be deducted.
TDS & IT returns: Even though TDS has been deducted by a financial institution, you will still be required to declare it in your IT returns. The income you earn from the rate of interest is taxable based on the tax slab. Thus, over here if banks charge you 10% when it comes to deducting TDS, you automatically fall into higher tax bracket, and thus you will require paying extra tax at the time of filing IT returns.
Saving TDS: Many people opt out of fixed deposit investment as they feel that there is no exemption from taxes. However, it is not true. You can save your interest income from being deducted if you submit the 15G or 15H form. As specified in the current budget, if your taxable income is lower than the total exempted income of INR 3 lakhs in a financial year, you can avail tax benefits on interest. However, your tax liability must be nil, and you must submit these forms without fail. However, if you do forget, then you will have to file tax returns to claim refunds.
TDS on savings: Currently, no TDS is being deducted on interest earned through savings bank account. However, if your interest income for the year exceeds INR 10,000 mark, then you will have to pay tax and show the effect on your IT returns.
These are five of the most important rules that many investors are not aware of. As an investor, it is essential that you have specific knowledge about it before you end up facing such a situation. Fixed deposits are one of the most popular investments among Indian investors, and it is essential for them to have knowledge about these rules.

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