TDS on interest earned on term deposit !
Interest earned on term deposits is subject to tax deducted at source under section 194A of Income Tax Act 1961
Term deposits here mean both fixed deposit and recurring deposit.
That means no TDS is leviable on interest on saving deposit
Interest earned on bank deposits is subject to tax deducted at source under section 194A of Income Tax Act 1961 if the total interest amount in a financial year exceeds Rs 10,000.
However this amount is increased to Rs 50,000 if the payee is Senior Citizen w.e.f 01.04.2018.
TDS is required to be deducted at the rate of 10%. However in case the payee does not furnish its PAN to the payer the rate of deduction shall be 20%.
TDS is applicable on the entire interest income if it is more than Rs 10,000/50000in a financial year, and not on the extent to which the interest income exceeds Rs 10,000/50000.
The deductee can however opt for lower/non deduction of TDS.
Application for lower deduction under section 197: The deductee can make an application in Form No. 13 to the assessing officer to get a certificate authorizing the deductor to deduct tax at a lower rate or no tax as appropriate. However having PAN is mandatory to file application u/s 197.The certificate shall be issued, directly to the person responsible for paying income, on a plain paper, under an advice to the applicant. The certificate cannot be issued with retrospective effect. The recipient may furnish copy of such certificate to the person responsible for paying the income for lower/no deduction of tax at source.
Declaration is submitted in form 15G/15H under section 197A of Income Tax Act 1961
If a declaration is submitted u/s 197A by the recipient to the payer along with his/her PAN, then no tax is deductible if the following conditions are satisfied:
1) Tax on total income of the previous year (PY) is nil
2) Total income does not exceed the basic exemption limit
Such a declaration shall be given in duplicate in form 15G (15H for senior citizens).
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