Understanding Income Tax On Fd Interest For Senior Citizens

While you can invest in SCSS Scheme, mutual funds, shares, and fixed deposits post-retirement, apart from calculating returns, do look at the tax treatment for each vehicle. This is because after retirement you will have to meet your tax liability without a salary. Therefore the lower your tax incidence is, the higher your savings will be. 

Fixed deposits are one of the most popular instruments in India for senior citizens as they are not market-linked and provide guaranteed returns. This makes them ideal for protecting and growing wealth. Therefore, before you invest it’s important to know their tax treatment to understand your net gains. To this effect, take a look at the consequences of income tax on FD interest for senior citizens.

Income tax on FD interest for senior citizen

FD interest earnings are taxable

When calculating your total taxable income at the end of a financial year, note that the FD interest you have earned is included under ‘Income From Other Sources’. Taking this into account, your income tax slab is decided and your tax rate is determined.

TDS limit

Your fixed deposit issuer levies Tax Deducted at Source (TDS) on your FD interest if it crosses Rs.50,000 per financial year. This limit applies to senior citizens like you who invest in an FD via a bank or post office. In case of company FDs, the TDS exemption limit is set at Rs.5,000.

TDS norms

If your earnings on an FD cross the aforementioned thresholds, then the issuer levies TDS at the rate 10%. However, this rate is applicable only if you have submitted your PAN details to the issuer. In the absence of PAN details, the issuer will deduct 20% tax at source. Thereafter, when you file your ITR, you can adjust your tax liability with the TDS that your issuer has already paid on your behalf. Your issuer is liable to cut TDS on your FD earnings on accrual basis and not on maturity. 

If your net taxable income falls within the exemption limits, you don’t have to worry about income tax on FD interest for senior citizens. In this case, you can submit Form 15H requesting your FD issuer to not apply TDS. If your issuer has already deducted the amount, you can claim a tax refund when filing your income tax returns. To avoid the hassles of filing for a refund, submit the form at the beginning of a financial year.

Now that you are aware of how your FD interest earnings attract taxes, plan your investments wisely. You can do so by using an FD calculator, as it allows you to determine your FD maturity proceeds beforehand. To earn higher returns, be sure to apply for a Senior Citizen Fixed Deposit from Bajaj Finance. Awarded ICRA’s MAAA and CRISIL’s FAAA rating, this FD couples high returns with investment safety. 

Here, you can earn up to 8.95% interest and receive payouts on a monthly, quarterly, semi-annual or annual basis, or at maturity, depending upon your liquidity needs post retirement. Further, in case of emergencies you can use your investment as security to avail a loan of up to Rs.4 lakh in a jiffy. To enjoy undisturbed liquidity, ladder your FDs by investing in multiple schemes of varying tenors ranging from 12 to 60 months. Bajaj Finance makes it easy for you to do so by allowing you to make multiple deposits via a single cheque. 

Apply now by booking an appointment with a Bajaj Finance representative and take control of your finances to secure your golden years!