Managing finances becomes increasingly important as one ages. For seniors, fixed deposits are the most popular investment option due to their guaranteed returns and low risk. However, it is important to note that the interest earned on fixed deposits is subject to TDS (tax deducted at source), which can significantly reduce returns. In this article, we will discuss strategies for senior citizens to avoid TDS on fixed deposits and maximize their returns. Keep reading to learn more.
Overview of Fixed Deposits
A fixed deposit (FD) is an investment in which an individual deposits a certain sum of money with a bank or financial institution for a fixed period. In return, the bank or financial institution pays the individual a fixed rate of interest on the deposited amount for that tenure.
TDS On Fixed Deposits
The interest that is earned on fixed deposits is subject to TDS (tax deducted at source). TDS is deducted at the source of the income, in this case, the interest from a fixed deposit. The TDS rate for fixed deposits is 10% for individuals, HUFs (Hindu Undivided Families) and firms, except for those who are eligible for a lower rate or are exempt from TDS.
The bank or financial institution where the fixed deposit is held is responsible for deducting TDS on the interest earned and depositing it with the government. The bank or financial institution will also issue a TDS certificate (Form 16A) to the individual, which will show the amount of TDS that was deducted from the interest earned.
How Senior Citizens Can Avoid TDS on Fixed Deposits
Senior citizens have a higher TDS threshold for fixed deposits. The TDS threshold for senior citizens is ₹50,000 per financial year, which means that if the interest earned on a fixed deposit is less than ₹50,000 within a financial year, no TDS will be deducted. If you are exploring the idea of investing your money in fixed deposits, you can quickly and accurately calculate the interest you will earn on your deposited amount using the Shriram Fixed Deposit Interest Calculator.
Here are several strategies that senior citizens can use to avoid TDS on fixed deposits:
- Invest in Tax-Saving Fixed Deposits
Tax-saving FDs offer a tax deduction under Section 80C of the Income Tax Act. The interest earned on these fixed deposits is tax-free up to a certain limit, which is currently ₹1.5 lakh per financial year. By investing in tax-saving fixed deposits, senior citizens can avoid TDS on the interest earned on their investments.
Looking for ways in which you can earn more with your FD? Read: The Quickest Way to Get Rich with FD Investment: Earn up to 9.40%* p.a.
- Use the TDS Threshold
The TDS threshold for senior citizens is ₹50,000 per financial year. This means that if the interest earned on a fixed deposit is less than ₹50,000 in a financial year, no TDS will be deducted. For example, if a senior citizen earns ₹45,000 interest on a fixed deposit in a financial year, no TDS will be deducted because the interest earned is below the threshold.
- Submit Form 15H
Senior citizens who are not required to file an income tax return, can submit Form 15H to the bank or financial institution where the fixed deposit is held. Form 15H is a declaration that the individual's total income, including the interest earned on the fixed deposit, is below the taxable limit. If Form 15H is submitted, the bank or financial institution will not deduct TDS on the interest earned.
- Choose a Bank or Financial Institution That Does Not Deduct TDS
Some banks and financial institutions do not deduct TDS on the interest earned on fixed deposits. Senior citizens can consider investing in fixed deposits with these institutions to avoid TDS. It is important to carefully research the bank or financial institution before investing to ensure that it is reputable and that the TDS is not deducted on the interest earned by the institution.
- Claim a Credit for TDS on the Interest Earned
If TDS has been deducted from the interest earned on a fixed deposit, senior citizens can claim credit for the TDS paid when they file their income tax returns. This will reduce their overall tax liability. To claim credit for TDS on the interest earned, the individual must have a TDS certificate (Form 16A) from the bank or financial institution where the fixed deposit is held. The TDS certificate will show the TDS that was deducted from the interest earned.
To generate the TDS certificate for your current investment with Shriram Finance, please log in to our Customer portal.
Conclusion
Investing in fixed deposits can be a good way for senior citizens to generate a steady stream of income, but it is important to carefully consider the risks and potential tax implications before making a decision. Shriram Unnati Fixed Deposits offer flexible tenures and Higher interest rates higher interest rates, as well as a renewal benefit interest of 0.25%* p.a. on matured FD renewals. By planning your financial goals carefully and taking advantage of these features, you can continue your financial journey without deductions. Invest now in Shriram Fixed Deposits!
FAQs
- Does Shriram Fixed Deposit offer additional benefits to senior citizens?
Shriram Fixed Deposits offer senior citizen investors an additional interest benefit of 0.50%* p.a. on their FD.
- Is it possible for senior citizens to avoid TDS on fixed deposits if the interest earned exceeds the exemption threshold?
If the interest earned on fixed deposits exceeds the TDS exemption threshold, it may not be possible to completely avoid TDS. However, it is still possible to minimise the amount of TDS paid by strategically planning your investments and taking advantage of available exemptions and deductions.
- Can senior citizens claim a refund for TDS deducted on fixed deposits?
If TDS has been deducted on fixed deposits, it is possible for senior citizens to claim a refund by filing an income tax return. However, this is only possible if the total tax liability (including TDS) is less than the total tax paid (including TDS).
- Are there any risks in avoiding TDS on fixed deposits?
There are no inherent risks in avoiding TDS on fixed deposits, as long as the interest earned is within the exemption limits set by the government. However, it is important to carefully track the total interest earned and ensure that it does not exceed the threshold, as failing to pay TDS when required can result in fines and penalties.
Key Takeaways
- Senior citizens can generally avoid TDS on fixed deposits if the interest earned is less than the exemption threshold (currently ₹50,000 per financial year for those over the age of 60 and ₹55,000 per financial year for those over the age of 80).
- There are several strategies that senior citizens may use to avoid TDS on fixed deposits, including keeping the total interest earned below the exemption threshold, opening a joint account with a family member or spouse, investing in fixed deposits with banks that do not deduct TDS, submitting Form 15H or Form 15G, and considering other tax-efficient instruments such as tax-free bonds or senior citizen savings schemes.
- It is important to carefully track the total interest earned on fixed deposits to ensure that it does not exceed the TDS exemption threshold, as failing to pay TDS when required can result in fines and penalties.
- If TDS has been deducted on fixed deposits, it is possible for senior citizens to claim a refund by filing an income tax return, as long as the total tax liability (including TDS) is less than the total tax paid (including TDS).
- Shriram Fixed Deposits have a high interest rate that can go up to as much as 9.40%* p.a. inclusive of the special interest benefit of 0.50%* p.a. for senior citizens and 0.10%* p.a. for women depositors.
