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2 mins Read | 4 Years Ago

Are my Fixed Deposit returns taxable

Save your money and watch it grow by the means of a Fixed Deposit account . As one of the most reliable and profitable financial tools in the market, a Fixed Deposit has been the answer to the financial needs of many. As a potential investor in Fixed Deposits, it is advisable to know how these returns might be taxed by the government. Here are a few of your FD tax questions resolved:

Are my Fixed Deposit Returns taxed?

Your fixed income returns are liable for taxation. But there is a wide range of tax liabilities that your Fixed Deposit income might fall under, so it is wise to have enough information and avoid any tax troubles in the future. Let us take a look at all the important facts that you, as a Fixed Deposit investor, should know.

How are my Fixed Deposit returns taxed?

Fixed Deposits are a great way for you to sustain savings and grow your wealth. However, your Fixed Deposit interests contribute to an increase in your income. Hence, the overall returns you earn by the means of a Fixed Deposit account are liable to be taxed under Income Tax laws, just as your regular income would be. In fact, under Income Tax laws, Fixed Deposit returns qualify as ‘Income from other sources’ and are therefore taxed accordingly. Here are the key points regarding the taxation process for Fixed Deposits:

  • When tax season arrives, keep in mind that the income you earn through Fixed Deposits is essentially clubbed with your income for the year. The resultant amount then determines which tax slab you fall under.

For instance, if your annual income exceeds Rs 10 lakh, you will be taxed under the income slab of ‘Rs 10,00,001 and above’, which is 30%. This means that you will also be taxed 30% (plus cess charges) on the interest earned on your Fixed Deposits.

  • There are certain tax exceptions to this. If the interest generated on your Fixed Deposit amount does not exceed Rs 10,000, you will not have to pay any tax. Also, as with all taxable income, if your annual income is below Rs 2.5 lakh, the applicable tax rate for your slab is zero. Hence, your Fixed Deposit income will not be taxed either.

What about TDS?

Tax Deducted at Source (TDS) is automatically levied on your Fixed Deposit (FD) by the bank in which you have your Fixed Deposit account. Compare this with the above process, which is a self-declaration of the applicable taxes on your Fixed Deposit returns. Therefore, the overall taxes on your FD returns are paid partly through your income tax filings and partly through TDS. The TDS applicable on your Fixed Deposit returns follows certain specific rules:

  • TDS is deducted by the bank only if your Fixed Deposit returns exceed Rs 40,000 in a year.
  • If it exceeds Rs 40,000 and you provide the bank with your PAN, the TDS deducted by the bank on your Fixed Deposit income is 10%.
  • If you do not provide the bank with your PAN, the TDS deducted by the bank on your Fixed Deposit income is 20%.
  • If your annual income for the year is below Rs 2.5 lakh, you are exempted from paying any TDS on your Fixed Deposit income. In such a case, the one way to ensure no TDS gets deducted by the bank is to submit Form 15G and Form 15H to the bank with your FD account.

A Fixed Deposit account is often the difference between saving up idle, fruitless money and reaping monetary rewards. So, if you are on the lookout for the most flexible and profitable Fixed Deposit account in the market, you can use ICICI Bank’s Fixed Deposit calculator to determine the principal amount, tenure and interest rates perfect for you. Choose from a tenure ranging from 7 days to 10 years, and watch your money grow with guaranteed returns and without any market risks.

If you are a customer, Apply for FD, here.

If you are not a customer, Apply for FD, here.


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