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Fixed deposits are considered a preferred mode of investment by a majority of investors looking for some fixed and assured return on investment. 

Even though it’s a great financial tool to make you reap out the best out of your investment, if you don’t take into consideration some tax issues, the ROI may not help you reap a sound income. I

Yes, investors not taking into account their (tax deducted at source) TDS while planning their finances can regret it later as taxes can easily lessen their overall returns. Investing in a tax saving FD is another method to save TDS. 

Nonetheless, there are a number of practical steps which you can take to curtail the effect of TDS that you may have to pay. How much TDS you are paying, and how much FD interest rate you are earning is what could make all the difference when it comes to profits. 

Incorporate these steps to save on TDS 

• Take care of the timing 

You know that interest income of an FD is taxed if you earn Rs.10,000 or more in a year. However, by timing your investment, you can easily earn under the threshold and save on paying heavy TDS bills. Example – if you get an FD in August, you could easily get the earned interest to split in two fiscal years helping you save on TDS. If a service provider raises its rate of interest during the FD tenor, you could also earn a higher share of returns. 

• Divide and enjoy 

Another thing to keep off the radar of the TDS is by splitting your FD investments into smaller denominations and investing with various lenders. Like this, you would be able to earn more interest payout, but even keep off TDS as the total payout won’t be Rs.10,000. You will have to plan out your investment tactfully. You can also open various FD accounts with the same lender to make things super easy for you. 

• Take care of the numbers

One of the other ways to stay under the Rs.10,000 threshold is by opening a fixed deposit scheme jointly with one of your family members, and by putting your name second. Generally, only the first or the primary fixed deposit account holder is liable for the tax and could help you keep off a heavy tax deduction. 

• Take care of the fine prints 

These TDS minimization tips that are discussed or mentioned are useless unless your exemptions and returns are properly declared. Form 15G and Form 15H are the forms that are dedicated designed for TDS. You must have filed these forms correctly to let the Government know if you are eligible or not for the TDS. 

What’s more, when it comes to tax saving FDs regarding if they are subject to similar taxes with that to TDS, there is often some confusion linked with how things are different. To answer or clarify such confusion, you could note that with a tax saving FD, some initially invested amount is exempted from tax. Nonetheless, the earned interest is subject to similar TDS rules and regulations as discussed above. 

The Bottom Line

If you have plans to put your savings or hard-earned money in an FD scheme, take care of all the tax issues (TDS) so that you don’t have to pay more taxes. When you pay more taxes, then the relation between the interest earned and taxes paid will leave nothing for you to carry home! If you are unsure of these TDS norms yet, you can get in touch with a financial expert to help you out!    

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