Form 15G & 15H: Save TDS On Fixed Deposit Interest

Fixed deposit is one of the oldest and traditional methods used by investors in India, to save tax or enjoy the benefits. Fixed deposit, as a saving method, is very popular because investors know for sure that the fixed amount of returns can be expected at the end of the tenure.

Moreover, if the interest received annually on the Fixed deposit is below Rs. 10,000, then no tax has to be paid over the amount earned, despite the income tax slab, an investor belongs to. There are many methods using which any investor can save tax on fixed deposit interest returns.

Form 15G/15H

An investor can submit Form 15G, claiming that he or she has no taxable income, then the bank will not collect tax on the interest returned. Form 15H is for the senior citizen. These forms are to be filled and submitted to the bank with the fixed deposit details, at the beginning of the financial year.

Splitting FD accounts

A person can have one fixed deposit account or multiple accounts. Suppose a person has one fixed deposit account, and the returns from that account are less than Rs. 10,000, then a person need not worry as no tax is collected over it. Now, if the fixed deposit account is Rs. 1.5 lacs offering 10% interest annually, then the interest return is Rs. 15,000 annually, thus investor will have to pay tax on Rs. 5,000.

Rather than having one fixed deposit with high returns, it is advised to have more than one fixed deposits with lesser returns, to save tax. Suppose, an investor has 3 fixed deposit accounts, in 3 different banks. So if the above investment is divided to Rs. 50,000 investments in 3 fixed deposits, rather than Rs. 1.5 lacs in one, then the return from each account is Rs. 5,000. Thus, the investor will not have to pay any tax on the returns. Instead of different banks, an investor can opt for investing in different branches of one bank.

This method is about saving TDS, but investors will still have to include the details while filing the income tax returns for that financial year.

Plan Timing of FD

It is a good idea to plan your fixed deposit time. Like, say, if Rs. 1.5 lacs are deposited with 10% interest rate at the beginning of the financial year, on 01 April 2013, then tax collected at the end of financial year, that is 31 March 2014, will be on Rs. 15,000. However, if the same amount and interest rate are deposited on 01 October 2013, then Rs. 15,000 of interest will be divided over two financial years (FY13 and FY14). Thus, the investor will not have to pay TDS.

The Indian market is full of risks and the returns are not stable, making a fixed deposit a very lucrative method of savings. This way an investor can plan savings with a fixed return, apart from this, the investment can be liquidated when required. Moreover, the opportunity to save tax by this investment technique makes it even more popular.

Compare all Indian banks interest rates before investing money on fixed deposits. In short, you can save tax by submitting the 15G/15H form, by splitting Fd accounts and by planing time on fixed deposits.