Income tax on the interest earned on Fixed deposit

POSTED BY vij ON April 7, 2012 8:00 pm COMMENTS (5)

i had deposited Rs 1 lakh in a FD account 5 years ago and now maturity value is 1.51 Lakh after deducting 10% TDS. So, the interest earned is Rs 51000. Lets say my annual income is 12 lakh.

My question is, will i have to pay 30% tax on the interest amount of Rs 51000/ also ? As i mentioned TDS is already deducted.

Thanks in advance for your response.

5 replies on this article “Income tax on the interest earned on Fixed deposit”

  1. richa jain says:

    My Q is quite on same lines as that of Pardeeps 2-Q.

    As per 26AS, I see entries of around 8072 Rs. for which bank has not deducted any tax whereas there are entries sum up to 18902 for which my bank has deducted TDS of 2718.
    I did not understand why for some interest payouts there is no TDS whereas for some it does?
    Also, in my ITR will I have to pay 10.3% TAX on amount over and above 10000?
    10.3% for the sum of 8072, 18902? and pay the difference as TDS on FD?

    Please advice.
    – Richa

  2. pradeep_bhatt says:

    Hello, i have one question.
    for FD deposit bank only deducts at 10%, rest we have to add to our taxable interest.
    this is understood.
    In my case bank updated me on TDS [RS 1267] for interest amount [12662] in first week of May.
    further details:
    I come under 30% tax bracket & savings interest = 14K.
    30% + 3% cess comes to 3913.
    diff to be paid = 2646.

    in form 26AS I see an entry for 1267 on 15 May 2012.

    My questions:
    1. should I pay interest under section 234 B?
    Note: my company has paid all tax amount eligible to be deducted. I just need to pay this diff of Rs 2646
    2. do i need to add 14K saving’s bank interest under “income from other sources” and pay 30% tax+ 3% cess [though my banker has not deducted any TDS for this]

    pl let me know.


  3. Dear Vij, as you are in 30% Tax slab, this 51K Rs. interest ‘ll be added to your income from all other sources & thus Tax liability comes out 30.9% for you. As the TDS has been applied @ 10% only. You should pay now the remaining 20.9% Tax from your own pocket.



  4. The taxation will depend on current tax brackets, unfortunately.

    This is one of the major flip sides of a FD (and all interest bearing) because one may have been in 10% tax bracket at the time of investment – made some calculations – found the investment useful – and may have invested. They may have moved to 20% or 30% tax bracket by the time the FD matures.

  5. This is how it goes. Interest earned will be added to your income. what ever tax bracket you are in, you will be taxed accordingly.

    As you mentioned you are in 30% tax bracket, Bank has deducted TDS, ie 10%. You will need to pay remaining 20%.

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