Finding and investing in an FD with high paying interest is one of the safest investments you can get. FDs are the starting point of investments, and you can go on multiplying your returns from FDs till the retirement age even if you have other investments in your portfolio.
If you have been making FD investments in a bank, then creating multiple FDs in a single branch can have its pitfalls. In case the interest earned on all these FDs crosses Rs. 40,000 in a financial year, then you are liable to have your Tax Deducted at Source TDS). This is a tax mandated by the Reserve Bank of India to be deducted by banks for all account holders.
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Thus, the single most requirement that people have is saving taxes on FDs. There can be multiple ways of saving this TDS on FDs. Before saving, understand the process of TDS calculation on your FDs.
TDS Calculation on FDs
It is important to understand how TDS on fixed deposits is calculated. For example: You are below 60 years of age and earn Rs. 25 lakhs as yearly income. You are liable to pay 30% tax on the taxable income after accounting for all standard deductions like 80C, D, E, and others.
In case you have an FD interest earning of say, Rs. 1.5 lakhs, it crosses a threshold of Rs. 40,000 in a financial year. This Rs. 1.5 lakhs will be taxed at the same 30% with the applicable surcharge and cess.
Ways to Save Tax on Your FD
The following reasons can help you save TDS deduction on your FDs.
- Annual Income – FD interest is added to your yearly income and tax is calculated on the total as per your taxable bracket. However, if you do not earn more than the minimum taxable bracket of Rs. 2.5 lakhs as per Income Tax Act, then your FD interest can be exempted from TDS deduction. You need to fill out Form 15G or Form 15H and submit it to your bank branch which will declare that your income is below this minimum threshold and your FDs will not be deducted for TDS.
- 5-year Tax-Free FD – Banks provide the facility of a 5-year tax-free FD. Interest from this FD is not subject to the tax bracket deductions. This interest is also deductible under Section 80 C of the Income Tax Act up to a limit of Rs 1.5 lakhs per financial year.
- Not have interest earnings more than the exempted limit- In bank FDs, you can try and ensure to not have larger or more FDs, which will increase your interest amount more than Rs. 40,000. For company FDs, this limit is subject to Rs. 5,000 limit.
Alternatives for Higher Interest Rates
You can easily do away with the hassles of getting little TDS cuts to bother your portfolio by investing in high-paying FDs like company FDs. These FDs pay 1-2% more interest than regular bank FDs. You should look to invest in a company with high credibility along with creditworthy instrument, which is rated by CRISIL and ICRA. Bajaj Finance FD meets both these criteria. Bajaj Finance FD has been rated with CRISIL’s FAAA/Stable rating and ICRA’s MAAA/Stable rating.
The interest rates are also among the highest in the market –
| Tenor in Months | Minimum deposit (in Rs.) | Cumulative | Non-Cumulative | |||
| Monthly | Quarterly | Half-yearly | Annual | |||
| 12 – 23 | 25,000 | 8.00% | 7.72% | 7.77% | 7.85% | 8.00% |
| 24 – 35 | 8.15% | 7.88% | 7.93% | 8.00% | 8.15% | |
| 36 | 8.60% | 8.28% | 8.34% | 8.42% | 8.60% | |
| Special tenors scheme | ||||||
| 15 Months | 1,00,000 | 8.05% | 7.77% | 7.82% | 7.89% | 8.05% |
You can use a maturity amount calculator on Bajaj Finserv website, which is an online FD calculator. It will easily tell you the maturity amount for a particular tenor, and you can plan your taxes accordingly. Also, it is easy to manage and track returns from multiple FDs using Experia- your online fixed deposit account.
