Many of us have the habit of neglecting the income we earn from fixed deposit while calculating or adding various income sources to generate annual tax declaration file. This is a primary mistake that can lead to an official notice from the Income Tax Department. It is required to add the interest you earn from FD’s as your income under the head ‘Income from other sources’. Make sure that you declare it while filling your income tax returns.
Consider the below facts to understand the importance of fixed deposits and tax declaration:
Claim the Deductible Amount from Tax-Saving Fixed Deposits
As per section 80C of Income Tax Act, 1961, a tax payer can avail deduction up to Rs. 150,000 from Gross Total Income. However, it is mandatory to include the interest earned from the fixed deposit in tax declaration. The tax-saving FDs offer much more flexibility while investing. Tax-saving FDs are like regular FDs but they are beneficial as the investor can avail tax deduction while investing in it. It is important to note that the interest on tax-saving FDs varies from bank to bank. Interest range on such FDs lies between 7-9% with assurance of security.
Fixed Deposits and its Importance in Tax Declaration
The interest earned from Fixed Deposits is fully taxable. The tax to be deducted needs to be deposited from your FD to the government. During tax declaration, you have to add the income earned from the FD to your gross income. Bank needs to deduct TDS from interest payable at the rate of 10% when it exceeds the limit of Rs. 10,000 per year. In case the individual doesn’t have a PAN card, then 20% TDS is deducted from their interest income. Make sure that you provide your PAN details to the bank. However, the bank need not deduct any TDS when the interest income from all FDs is lesser than 10,000 INR p.a.