Your Comprehensive Guide to Filing an ITR for Income from Fixed Deposits

Your Comprehensive Guide to Filing an ITR for Income from Fixed Deposits

Fixed deposits, often known as FDs, are among the safest investment alternatives. Some banks provide tax-saving FDs, which have the benefits of reducing tax liability and accumulating wealth for the future. You can claim a deduction under section 80C of up to Rs 1.5 lakh if you have also invested money in tax-saving FDs. Be aware that only FDs with tax-saving features are eligible for tax deductions.

Tax-saving FDs: What are they?

As its name suggests, a tax-saving FD account is a particular category eligible for a tax deduction per Section 80C of the Income Tax Act of 1961.

How is Taxation on FDs Applied?

The five-year lock-in term for the tax-saving FD plans allows for a maximum deposit of Rs. 1.5 lakh each fiscal year that is eligible for a tax deduction under Section 80C of the Income Tax Act. The public is, however, wholly taxed on the interest received from the FD.

To put things into context, "if an investor creates an FD account by depositing Rs 5 lakh, they may claim a Rs 1,50,000 deduction under Section 80C on the Rs 5 lakh investment. The public would, however, be required to pay taxes on the interest received on the FD,” according to tax expert Sunil Garg.

Garg noted that older individuals are eligible for a deduction of Rs 50,000 under Section 80TTB for the interest paid on their FD.

How is the Income from FD Interests Taxed?

If the amount of interest exceeds Rs 40,000 for persons who are not senior citizens (the threshold for a senior citizen is Rs 50,000), banks deduct tax at source when they credit interest to your account.

How is Tax on Interest on FDs Calculated?

After each fiscal year, including interest income (even if it is not paid out) in the total income on the income tax return, you must include interest income in the "Income from other sources" section of the ITR when it is filed. The tax bracket that a person is in should be known.

It will include Tax Deducted at Source (TDS) deductions made in the past back into the final tax liability by the income tax division.

You must add the total interest income from fixed deposits produced in a particular fiscal year to total income and taxed appropriately if the bank does not deduct TDS from interest revenue.

How do I Claim Deductions on My FD?

Section 80C allows taxpayers to deduct Rs 1.5 lakh from their taxable income for their FD deposit. For money received from FD, no deductions are accessible to the general public.

On the other hand, older persons are eligible for a deduction on FD deposits under section 80C and a deduction on FD interest up to Rs 50,000 under section 80TTB of the Income Tax Act.