How to file tax returns after TDS is cut on interest from Fixed deposit ?

POSTED BY Raja ON March 13, 2014 3:26 pm COMMENTS (3)

Consider a taxable income of 11L after considering all exemptions and deductions. So the person falls in the 30% slab. Being a salaried person, all income tax calculations are taken care in the Form 16 issued by the employer.

Apart from his salary income, the person invests 15,00,000 in fixed deposit for a year. Lets consider the interest accrued from this fixed deposit to be 1,50,000 at the end of the year.

Assumption: Since the taxable income is more than 2L, the person cannot submit form 15G to the bank. Is this correct?

The bank deducts TDS @10% and returns Rs. 1,35,000 to the person.

How should the person file his returns now?

1. He should just file returns for his form 16 and not worry about the interest from fixed deposit as the bank has already deducted TDS

2. He should add 1,35,000 to the taxable income i.e. total taxable income becomes 12,35,000 and then recompute the tax to be paid. If form 16 shows nil tax to be paid, but addition of 1,35,000 shows that some tax must be paid to the govt, the person should pay the excess tax while filing returns.

Which understanding is correct?

Is there some way in which tax can be saved, by showing the interest earned from FD as set off against some interest that is being paid (e.g. top up loan)

Need a good understanding on how to plan the adjustment of interest earned from FD’s

3 replies on this article “How to file tax returns after TDS is cut on interest from Fixed deposit ?”

  1. ashalanshu says:

    Dear Raja, you park it in FDs or debt funds but return and taxation issue ‘ll remain same for 6 months’ period. So if you are quite sure of requirement, park it anywhere FD or debt funds. In case the time frame may go up to 1Y+, then you should park in debt funds

    Thanks

    Ashal

  2. Raja says:

    This effectively means that for a person in the 30% tax slab, the effective ROI is approximately 70% of the ROI for which he starts FD.

    E.g. If FD is made at 10% ROI, the effective yield is going to be 7% after tax

    Keeping the same amount in Savings deposit will yield only 4%. So putting it in FD is still better.

    Is there any other non-risk avenue where money can be parked for 6 months and higher ROI can be achieved?

  3. Ajay says:

    1. Add the 1.5L as income to 11L and recalculate the tax
    2. Deduct the tax already paid through employer and TDS done by the bank
    3. The remaining amount should be paid to the govt

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