Interest earned on Fixed Deposits (FDs) is considered as part of your income and is taxed accordingly. Here’s how it works:
1. Income tax slab rates: The interest you earn from FDs is added to your total income and taxed based on the income tax slab you fall under.
2. Tax deducted at source (TDS):
Threshold: If the interest income from FDs in a financial year exceeds INR 40,000 (INR 50,000 for senior citizens), the Bank will deduct TDS.
Rate: TDS is deducted at 10%. If you haven't provided your PAN to the bank, TDS may be deducted at 20%.
3. Filing returns: You need to report the interest income from FDs under "Income from Other Sources" while filing your Income Tax Return (ITR).
4. Form 15G/15H: If your total income is below the taxable limit, you can submit Form 15G (for individuals below 60 years) or Form 15H (for senior citizens) to the bank to prevent TDS deduction.