TDS deduction on Fixed Term Deposit

POSTED BY Sushil Chhabra ON April 27, 2013 2:12 pm COMMENTS (18)

I have Fixed Deposit in a Co-operative bank since last 15 years. The same is going to mature in the current financial year. The bank has not deducted any TDS amount till date. I want to know when the same matures this year, will I be getting the amount…

…after TDS deductions for the last 14 years?

OR

…after TDS deduction for the current year only?

 

I also want to know the TDS deduction rule (in general) for fixed deposits.

 

 

Thanks.

18 replies on this article “TDS deduction on Fixed Term Deposit”

  1. Dear Karthik, as you are claiming it a certified info, I accept it as it is & stand corrected from my earlier reply. So even if 1st April is actual credit date, the interest should be treated for 31st March.

    Thanks

    Ashal

  2. Karthik says:

    Hi Ashal,

    In the statements, bank will have two dates mentioned. Value date and Effective date. If everything is accounted as per the date you receive your money, why there is a need to have two dates? If it’s only for bank’s accounting, then why it is being reflected in customer’s statement?

    I had PwC submitting my IT returns on my behalf, which they requested me to submit it for the accrued year and not for the payment year. Even I was told to estimate the probable Interest amount and pay advance tax.

    Also, I had clarified this with Payroll solutions provider and they also confirmed the same. They even suggested to include it as part of proof submission so that the tax will be deducted as if it was a TDS from company and I don’t need to pay Advance Tax.

    Thanks,
    Karthik

  3. Dear Karthik, you are answering from bank’s accounting, whereas I’m answering for my accounting. i.e. the amount credit date to me is important to me for my tax calculation. I w’d love to get this answer clarified from a tax professional or a CA.

    Thanks

    Ashal

  4. Karthik says:

    Hi Ashal,

    Payments and Collections are different module for the bank. If you expect an income, the organization will provision as receivables. Even in that case, it will be in their accounts for that year which will be carried over to the next fin year as receivable.

    Interest accrued for Oct-Mar is income earned for Oct-Mar for which needs to be considered. for 2012-13.

    Consider a FD with maturity date of 15-Apr-2013, bank will deduct the TDS as of acrued amount until 31-Mar-2013 even though the interest is not credited to your account. Why that’s so? Because the amount is accrued which will come as part of 2012-13 fin year only. You cannot consider the total interest liquidated on 15-Apr as your income for 2013-14.

    Thanks
    Karthik

  5. Dear Karthik, if I’m paying you some amount for your services & for me the cheque date is 31st March & for you the actual credit date is 1st April, what ‘ll be your income call?

    Thanks

    Ashal

  6. Karthik says:

    Hi Ashal,

    Eventhough arrears are given, they are not given back dated. So that cannot be an example.

    The interest is credited with value date as 31-Mar-2013. Value date is what had to be referred in all cases. The amount is taxable for 2012-2013. Banks assume this as an expense for 2012-13. How the amount can be an expense for the banks in 2012-13 and for you it will be an income in 2013-14?

    Regards
    Karthik

  7. Dear Karthik, if you are receiving an arrear of your past income, the same is taxable in the year of receipt. Same is the case for this interest. yes the interest belong to the olf FY but as the interest is credited in the new FY, the credit date ‘ll be applicable for calculation.

    Thanks

    Ashal

  8. Karthik says:

    Hi Ashal,

    I saw your following reply to one of the questions there

    “Dear Hitesh, please consider the 1st April 2013 as the effective date for the fact that Interest due on 31st March 2013 is paid to you actually on 1st April 2013. So the date of actual payment is relevant for your tax calculation.”

    Actually, the value date is what is important. Interest credited for Savings account is half yearly now in HDFC. And this amount is from 01-Oct-2012 to 31-Mar-2013. This should be added as 2012-2013 yr income only.
    Moreover, the Credit Interest Capitalized will happen during End of Year process, which will be considered for 31-Mar-2013. The amount will be generally credited with 01-Apr-2013, becoz the logical day for the system is 01-Apr-2013.
    Contrary to this, If you withdraw amount after 10 PM, the system will have value date as next day and still it will calculate the interest for that amount on that day’s End of Day process. But, only for this Credit Interest, the system will credit with previous day as value date because, it has to be considered as previous year’s income.
    Also, Interest is not due on 31-Mar-2013. Interest is due every day as it’s accrued on daily basis now, but credited to your account on 31-Mar-2013.

    Thanks,
    Karthik

  9. Dear Sushil, please check with your bank first. Are they going to apply TDS? If yes, please quote to the bank that you have already declare the past years’ income & TDS should be applied only on the interest accrued in the financial year of maturity i.e. current FY.

    Thanks

    Ashal

  10. Dear Sushil, please read this first. If still you have doubts, please come here again & we ‘ll try to solve your queries.

    https://www.jagoinvestor.com/2013/04/tds-tax-deducted-at-source-guide.html

    Thanks

    Ashal

  11. Banks deduct TDS @10% if the interest earned is more than 10,000 in a financial year. TDS is deducted every year. If they have not done so it means you dont qualify for TDS

    If your income is taxable then you should (have) paid tax on the interest earned. If you have not done so, you will have do it now.

    1. Sushil Chhabra says:

      @Ashal: Thanks for your reply. I have already gone through the link few days back but that doesn’t address my concern.

      In the past, every year while filing return, i have shown the interest income on fixed deposit as accrued income during that given year and accordingly i have paid tax.

      The bank has not deducted any TDS since last 14 years on my fixed deposit amount. Now in this financial year, my FD will mature. The interest earned on my FD already crossed 10,000/- few years back but the bank never deducted any TDS on the same. So will they be deducting any TDS now when it will mature this year?

      1. Which bank is it ? Some PSU banks are known for not deducting TDS (some branches) . They do not understand things a lot of times and hence do not cut it 🙂 .

        1. Sushil Chhabra says:

          @Manish: Bank is Central Cooperative Bank.

          I know that TDS is applicable for interest earned above 10,000/- in a given financial year. My interest in any given year (including the first year) has always been above 10,000/-

          So will the bank be deducting TDS for the previous years (last 14 years) also OR only for the current financial year?

          1. If they do remember to deduct it will be on the entire interest accrued.
            In any case whether they do it not the onus is on you to pay tax as per you slab.

        2. Karthik says:

          Hi Manish,

          Strange response/statement from you..

          Looks like people here know more banking/financial/accounting than the professionals in PSU banks. Nowadays people with 5 MFs/ 10 Shares/ 3 Yrs experience think they know everything in the financial world.

          Regards
          Karthik

      2. Cumulative interest exceeding 10,000 is different.

        TDS applies only when interest in a financial year exceed 10,000. If this does not apply to you then bank will not deduct TDS when it matures.

      3. Sushil, Sorry I missed your message that you had declared interest. Ashal’s answer (as always) is spot on.

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