Fixed deposit (FD) is one of the safest investment options in India, widely preferred by investors seeking steady returns. Many individuals, including senior citizens, commonly invest in fixed deposits to accumulate a regular income stream. However, understanding the taxation of fixed deposit interest is essential, especially when your FD interest crosses certain thresholds such as 15 lakh FD interest per month. Tax deducted at source or TDS plays a vital role in this context, and being aware of the applicable rules can help you optimise returns and avoid surprises at tax filing time. Additionally, choosing a reliable provider like Bajaj Finance FD can give you competitive interest rates coupled with convenient digital services.
In this article, we will discuss everything about fixed deposit taxation in India, TDS rules on FD interest, tips to claim exemptions and optimise tax liability. We will also explore the current FD interest rates applicable for senior citizens and non-senior citizens, along with the benefits offered by Bajaj Finance FD.
Understanding fixed deposit interest and taxation
A fixed deposit is a term deposit where you invest a lump sum amount for a fixed tenure and earn interest at a predetermined rate. The interest earned is taxable as per the investor’s income tax slab. For instance, if your annual income tax rate is 30%, the FD interest amount will be added to the taxable income, and tax will be levied accordingly.
Banks or Non-Banking Financial Companies (NBFCs), such as Bajaj Finance FD, pay interest at different intervals based on the chosen scheme—monthly, quarterly, half-yearly, annual, or at maturity. The frequency of interest payment might impact your immediate tax liability as interest received is taxable in the year it is received.
TDS rules on fixed deposit interest in india
The government mandates Tax Deducted at Source (TDS) to ensure tax compliance. TDS on fixed deposit interest applies when the interest earned in a financial year exceeds Rs. 50,000 for regular citizens and Rs. 1,00,000 for senior citizens (aged 60 years and above). This threshold applies per depositor per bank or NBFC with a core banking system.
- TDS rate on FD interest is 10% if PAN is provided by the depositor.
- If PAN is not provided, TDS is deducted at 20%.
- TDS is applicable on total interest earned during the financial year, not on the principal amount.
- The bank or NBFC deducts TDS before paying the interest, remitting it to the government.
For example, if your monthly fixed deposit interest amounts to Rs. 1.5 lakh, TDS will be deduced on the interest exceeding the prescribed threshold. It's important to note that the bank will deduct TDS automatically once the interest crosses the limit within a financial year. Eligible individuals whose total income is below the basic exemption limit can submit Form 15G (or Form 15H for senior citizens) to the bank to avoid this deduction.
How to claim exemption from TDS on fixed deposit interest
To avoid automatic TDS deduction or to claim an exemption, consider the following tips, keeping the current thresholds in mind:
1. Submit Form 15G/15H
- Form 15G (for individuals below 60 years) and Form 15H (for senior citizens) can be submitted to your bank or NBFC (like Bajaj Finance FD) declaring that your total income including FD interest is below the taxable limit.
- Submitting these forms prevents banks from deducting TDS.
- These forms must be submitted annually.
2. Consolidate deposits below TDS threshold
- Since TDS applies on interest over Rs. 50,000 (for non-senior citizens) / Rs. 1,00,000 (for senior citizens) per bank, you can open FDs across multiple banks or NBFCs to distribute your investment.
- This helps keep interest income below the threshold in each entity.
3. File income tax return and claim refund
- If TDS is deducted but your total income is below the taxable slab, you can claim a refund by filing your income tax return.
- Ensure to report the TDS amount as per Form 26AS to reconcile tax records.
4. Invest in tax-saving FDs
- Although traditional FDs attract TDS, investments in tax-saving fixed deposits with a lock-in period of 5 years under Section 80C help reduce taxable income (on the principal amount).
- However, interest earned on such tax-saving FDs remains fully taxable as per your slab rate.
Note: Bajaj Finance does not offer tax saving FDs.
Benefits of investing in Bajaj Finance FD
Bajaj Finance FD offers attractive features that make it a popular choice among fixed deposit investors in India. Here are some of its notable benefits:
- Competitive interest rates for both senior and non-senior citizens, as seen in the tables above.
- Flexible investment tenures ranging from 12 months to 60 months.
- Several options for interest payout frequency: monthly, quarterly, half-yearly, annually, or at maturity.
- Easy online platform for investing and managing deposits.
- High credit ratings ensuring safety of investment.
Investors with large fixed deposit portfolios, especially those who generate substantial FD interest such as 15 lakh FD interest per month, can benefit by spreading investments across different tenures and payout options with Bajaj Finance FD to optimise returns and tax impact.
Conclusion
Investing in fixed deposits remains a hallmark strategy for safe and predictable income across income groups and especially among senior citizens. Understanding the taxation framework and the nuances of TDS deduction on FD interest is crucial, particularly when your FD portfolio grows significantly, such as with 15 lakh FD interest per month. Timely submission of exemption forms and wise portfolio diversification can help minimise tax outgo.
Choosing a dependable and high-yield provider like Bajaj Finance FD ensures you enjoy some of the best interest rates available along with reliability and convenience. Remember that despite TDS deductions, fixed deposits provide a risk-averse income avenue, and proactive tax planning optimises your gains effectively.
By knowing your fixed deposit taxation, TDS rules, and exemption opportunities, you can confidently grow your investments while minimising unnecessary tax burdens. Explore Bajaj Finance FD options today to earn steady returns with trusted service and tax-friendly solutions.
