Good news for Fixed Deposit (FD) holders! There has been an announcement regarding a big change in the TDS (Tax Deducted at Source) rules in respect of fixed deposit interest. This new update will come into effect from September 15 and will offer some relief to millions of FD investors across the country. Henceforth, the change will allow these FD holders a little freedom on their savings with better rates without having to worry about unexpected income tax deductions.
What Are the Current TDS Rules on FDs?
Currently, under the Income Tax Act, banks deduct TDS @ 10% on the interest earned on fixed deposits, if the total interest exceeds ₹40,000 in case of a regular taxpayer and ₹50,000 for a senior citizen. If the PAN card is not provided for any reason, the rate of TDS may go up to 20%. Many FD holders often get surprised with deductions when their income falls below the taxable limit.
What Will Change From September 15?
According to the new TDS rule, the government has increased the threshold limit for TDS, meaning FD holders will now earn higher interest without tax deductions. The interest limit for TDS for a regular account holder has now been widened from ₹40,000 to ₹60,000, while that of a senior citizen from ₹50,000 to ₹75,000.
If your annual FD interest income keeps below these limits, your bank will not deduct TDS.
How This Helps an FD Holder
With the new rule, the direct players who would benefit are:
- Small depositors, whose limited savings sometimes are eroded by TDS.
- Senior citizens who treat the interest on their FDs as a source of regular income.
- Those under the tax threshold who still bear the brunt of TDS deductions.
By raising this limit, the government allows more of the money to stay in the hands of savers, thereby maintaining liquidity and saving them the pain of filing for a refund of taxes.
Into Force from September 15
The amended TDS laws will be implemented on September 15 onward. From that day, banks will not deduct tax on FD interest unless the income exceeds the new threshold. This is part of wider efforts to simplify tax procedures and promote small savings.
Conclusion
This decision of the government to amend TDS rules on FD interest payment is a welcome relief for millions of depositors. Unarguably, the exemption limit of ₹60,000 for general account holders and ₹75,000 for senior citizens will provide FD investors with higher returns without tax deduction. This will ease the burden on the small saver and bolster his faith in fixed deposits so that more people come forward to place their money in safe saving instruments like FDs.