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POSTED BY ON December 19, 2012 7:14 pm COMMENTS (5)
My wife has deposits in a bank which fetches her interest upto the taxable limit of 200,000 pa. in one bank branch. Can she further invest in a foreign bank (but under the same PAN number) to avoid the TDS by the bank system.
Does the PAN system deduct TDS automatically, even if the funds are spread under different banks, inspite of producing 15G form??
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@bemoneyaware,
Good points, but may be you would want to check the accuracy of your statement on TDS liability based upon a branch level. My understanding is that it was true only if the branches were not computerised. Now it is at a Bank level, e.g. if you have FDs in diff branches of SBI, the limit of 10K would be computed based upon sum of interest from all branches of SBI.
From our article Fixed Deposits and Tax
If the total interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 10,000 in a financial year, you become liable for TDS. TDS is deducted every time
the Bank pays interest during the financial year and the interest earned for the year is more than Rs 10,000 in a single branch.
In addition, TDS is also deducted on interest accrued (but not yet paid) at the end of the financial year.
For example, if an investor has earned Rs 20000 as an interest in one year, then the bank would deduct Rs 2000 and pay only Rs 18000 as the amount exceeds the limitation of Rs 10000.
Note Tax liability for TDS is determined at branch level. One of easiest way adopted by many depositors is to spread their investments across various branches so that the interest earned in a particular branch is below Rs10,000 in a financial year.
If you believe that your total interest income for the year will not fall within overall taxable limits, you should inform the Bank not to deduct TDS on deposits by filling form 15G/H
Important points that one needs to remember is
Fresh forms are required to be filed each year. As incomes of investors may differ from year to year, the eligibility for furnishing the forms has to be ascertained every year.
Secondly, for optimum benefit, these forms need to be furnished at the beginning of the fiscal such that the entire amount of interest escapes TDS. If the form is filed during the year, the tax already deducted cannot be adjusted against future tax deductions.
Gopal,
You are right, your wife can invest in any other bank (foreign or national) to prevent TDS being deducted. This is not illegal. However, you would have to consolidate interest received from all banks and pay taxes end of the year.
The exact conditions of when form 15G can be given can be found here:
http://www.dnaindia.com/money/comment_who-is-eligible-for-filing-forms-15g-15h-and-how-to-save-tds_1582203
What is taxable is taxable! in form 15 G you declare that incl interest your total income is below taxable limits! You can do that only if it is the case else you will end up paying tax with interest.
Today all banks are networked and transactions are monitored by the IT dept.
So TDS cannot be avoided. IT dept may takes years to get to this but this only means more interest!