Anyone can open a fixed deposit with or without a bank account. The benefits are numerous for an investor for locking a certain amount of money as an investment and receiving regular interest on it. It is a much better option than a savings account, as a fixed deposit allows you to secure your future for unforeseen circumstances.Also, there has been seen having a highest interest rates on fd. While fixed deposits offer many benefits, investors need to know about tax deductions on the receiving interest. TDS is a system of collecting income tax, from individuals who earn an income. Any payment under the income tax Act of 1961 must be paid after deducting the implied percentage.
A TDS is applicable after the interest has exceeded a certain amount, which is deducted by the bank or NBFC before you receive the interest. TDS is deducted on the following types of payments: Salaries, Interest Payments by banks, Commission payments, Rent payments, Consultation fees, and Professional fees.
Investors must possess all legal documents like the latest photographs, KYC certified documents, PAN, certificate of incorporation, ID proofs of authorised signatories, HUF is applied, and bank statements.
Some easy ways to bypass TDS on fixed deposit interest are :
- Fixed Deposit Maturity: Investors can divide the interest amount into two financial years, which can help them to avoid TDS. If your interest is within the tax budget of 10%, you can easily claim the amount back while filing for tax returns. By allowing the deposit mature timely, it results in a higher rate of interest, which does not affect the TDS amount deducted.
- Maximum Interest: At any given financial institution or NBFC, investors must be sure to keep their interest return up to 40,000. If the amount exceeds, you must invest the interest amount in other banks by opening various other fixed deposits. This method helps you to avoid TDS and secure maximum interest for future investments.
- Hindu Undivided Family: Investors can bypass TDS on a fixed deposit interest with a Hindu Undivided Family. The HUF was created to help investors save on TDS in a legal manner. Every adult member of the family can very well enjoy deduction up to 1,00,000 under Sector 80(C) of the Income-tax Act, 1961.
- Form 15G, 15H: For 15G is applicable for investors below the age of 60 years while form 15H is applicable for investors over the age of 60 years. 15H form allows senior citizens to enjoy their retirement income with zero tax on their income. A benefit that helps adults to secure a future for themselves and their children.
- Company Fixed Deposit: Investors can gain a high-interest rate without having to worry about the TDS deducted. Investing in multiple deposits of a certain principal amount will not let you exceed above 5,000/- Rs.
To bypass a TDS, investors much insure multiple investments or a high rate interest return that outweighs the TDS deducted. Fixed deposits can be allocated for in various banks and NBFCs of your choosing, which can also benefit you in many ways.
Make sure all the strategies fit well while filing for tax returns and gain maximum interest. Banks and NBFCs can help your interests in the principal amount turn into periodic payout for easy future investments like property or business.
