Ways to Reduce or Save Tax on Fixed Deposits
- If your total income for the year is below Rs 2.5 lakh, you can submit or use form 15G/15H. This will ensure that the bank does not deduct TDS since income does not fall in the taxable slabs and you are not liable to pay any taxes.15 G : For below 60yrs15 H : For senior citizen , above 60 yrs
What is Form 15G and 15H?
Form 15 G
When a depositor’s annual income is less than Rs.2.5 lakh (or Rs.3 lakh for senior citizens) and tax due is nil, then the depositor must file Form 15G or Form 15H with the bank requesting the bank to not deduct TDS on interest income from FDs exceeding Rs.40,000 or, in the case of senior citizens, Rs.50,000.Form 15H
Form 15H is similar to Form 15G, except that Form 15H is exclusively for senior citizens who are 60 years and above in age.Conditions For Form 15H
- The depositor should be 60 or above of age
- Annual income should be less than Rs.3 lakh in case of senior citizens and Rs. 5 lakh for super senior citizens.
- Should be a resident Indian.
Safe FD upto 5 Lacks in Co-operative Banks
In fact, through Budget 2020, Niramala Sitharaman has made this instrument all the more lucrative. Should you invest in an FD from a commercial or cooperative bank, your investment is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Earlier, coverage for all deposits, including those in current accounts, savings accounts and by way of fixed deposits, extended up to Rs.1 lakh. Now, this limit has now been increased to Rs.5 lakh.New TDS, TCS rates TDS on fixed deposit interest paid by a bank will now be deducted at 7.5 per cent instead of the previous 10 per cent.- Bank FD Safe limit - 40,000 rs interest / financial year
- Section 194 : TDS on Shares (google more, read below in summary)
- Section 194 A : TDS on other securities(google more, read below in summary)
- Interest paid by bank/ co-operative bank/ post office up to 10000
Interim Budget 2019 has extended the limit of 10,000 to Rs 40,000 with effect from F.Y. 2019-20 (AY 2020-21)
- In other cases its upto Rs. 5000
- Interest paid by firm to partner
- Interest on income tax
- Interest on bank saving A/C
- Interest paid to any bank or LIC or UTI or Any insurer etc.
- Interest paid by co-op society to its member or to any other co-op society
- Interest paid in respect of certain scheme of past office , Kisan vikas patra, india vikas patra, national saving certificate, P.O. monthly income A/c, P.O. Recurring deposits.
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Income upto 5 lacks was not taxable. Hence, Those who have Annual Income upto or less than 5 lack rupees in the time duration of 1 April 2019- 31 March 2020 should not pay in TDS on Bank FDs, Dividends from Mutual Funds & Shares. But from 1 April 2020, start noting as income more than 2.5 Lack in this upcoming finantial year which will end in 31 March 2021, is chargeable.
- Key advice FREE - Summary
- Hence, File 15 G AT THE BEGINNING OF FY 2020-2021 ( 1 APRIL 2020- 31 MARCH 2021) for mutual funds, bank FDs.
- Make sure you keep no more than approx 4 laks / 1 bank where annual interest will not be more than 40,000 rs in FY 2020-2021, ease of calculation considering 10% Max rate of interest **IF GIVEN ( 1 APRIL 2020- 31 MARCH 2021) . As current rate of interest is near about 5-6% which is half of that, we can keep upto 6-7 laks/ Bank where annual rate of interest will not be more than 40,000 / fy 2020-21.
- Co-operative Banks gives more rate of Interest than nationalized banks , we can keep upto 5 laks safely in 1 single co-operative Bank as it's insured now & won't come more than 40,000 rs/annual year rate of interest for fy 2020-21.
- Ref Link : Mutual Funds dividend if more than 5000 rs & your income becomes taxable then only you will pay 10% on that. Show your income not taxable by using allotments under 80C which is 1.50laks. Simply if you drop 1.50laks in your PPF and earn 2.5 laks in this finantial year you wont have to pay any TDS , tax :) cheers ! It's withold. check the meaning here
- Long Term Capital Gain : The LTCG tax is applicable at a rate of 10% on gains over and above Rs 1 lakh a year, and there is no benefit of indexation. If you sell shares, Mutual Funds with ner profit of more than 1 lakh in equity section.(Pls check non-equity mutual funds on Google, I m not mentioning here.) so, Don't sell shares , equity mutual funds which will give you more than 1 lakh rs/ fy profit.