Tax on FD: Nowadays we have a lot of investment options, despite this, people still consider FD as the best means of investment. But do you know that tax is also charged on FD. Let us know the complete update related to this…
Investment option: Fixed deposit is considered the preferred means of investment. The reason for this is that FD is considered a safe investment and it provides guaranteed returns.
In today’s time, despite many investment options, a large section of people still rely on fixed deposits. But do you know that you are also taxed on the income from FD?
What are the rules of tax on FD –
Actually, whatever interest you get annually on FD is added to your annual income. If your income comes under the ambit of tax, then after adding this income, you will have to pay whatever tax is calculated as per the slab rate. While filing ITR, this income from FD interest is included in Income from Other Sources.
Benefits of FD –
- You get fixed returns on FD, that is, the amount is given to you on maturity according to the interest rate at which you invest money in FD. If the bank changes the interest rates in between, it will not affect your FD. But if you have made a floating FD then the interest rates may vary.
- If you have made an FD somewhere, then you get the facility of loan in return. Apart from this, overdraft facility is also available on the basis of loan in many banks. The reason for this is that the FD amount is with the bank as a guarantee. The bank gives you loan only according to your amount. If you are not able to repay the loan on time, then that loan is covered with the amount of your FD.
- If you make FD for 5 years or more, then you get a chance to claim tax exemption under Section 80C of the Income Tax Act 1961. According to Section 80TTB of the Income Tax Act, senior citizens do not have to pay tax on interest up to Rs 50,000 earned on FD in a financial year.
- Most banks offer 50 basis points i.e. 0.50% more interest to senior citizens on FDs of different tenures than general fixed deposits. Apart from this, some banks give additional interest of 0.25% to ‘Super Senior Citizens’ aged 80 years or more.
