How to avoid TDS on interest for fixed deposit

Fixed deposits are the most relied upon investment method. TDS is applicable on interest above Rs.10,000 from bank fixed deposits. If the interest for a financial year is above Rs.10,000, the investor will get only the amount after deducting 10% tax.

This amount is refundable if the investor has no tax liability. But for this you have to file an income tax return and wait for months. For someone with no taxable income, it can be difficult to wait months for such a refund. Therefore, such difficulties can be avoided by applying for TDS exemption.

Form 15G is required to be submitted to the bank for exemption from TDS. These forms should be submitted for TDS exemption only if there is no taxable income.

People under the age of 60 can use Form 15G. In addition to individuals, Hindu Undivided Families can also submit this form.

Form 15H is only for individuals over 60 years of age. For those above 60 years of age, the tax is applicable only if the interest is above Rs.50,000. Therefore, those above 60 years of age are required to pay Form 15H only if the interest is above Rs.50,000.

It was announced in the last budget that senior citizens above the age of 60 will be exempted from paying tax on interest earned on fixed deposits in banks and post offices. The concession is a relief for those over 60 as senior citizens mostly rely on fixed deposits for their monthly income.

Those who submit Form 15G need to verify that they are eligible for it. Form 15G can be submitted only if the taxable income is Rs.2.5 lakhs or less. You also need to make sure that the total amount of interest you receive each year does not exceed the tax deduction limit. That is, if the interest income is more than Rs.2.5 lakh, you are not eligible to submit Form 15G. Form 15G can be submitted only if your taxable income and interest income are not above the tax deduction limit.

To avoid TDS, Form 15G has to be submitted at a bank branch which receives interest above Rs.10,000 through a fixed deposit. PAN number should also be provided at the time of submission. The form will not be valid if the PAN is not provided. The bank will also charge 20 per cent TDS.

Most banks charge interest on a quarterly basis. Therefore, it is advisable to submit Form 15G in June of each financial year.

These forms can be submitted not only to banks but also to other institutions that charge TDS on interest. TDS is levied if the Employees Provident Fund (EPF) is withdrawn before the completion of five consecutive years of service. If the withdrawal amount is more than Rs.50,000, 10 per cent TDS will be levied. Form 15G can also be submitted to the EPF office for TDS exemption if the taxable income does not exceed the tax deduction limit.