TDS Refund for Fixed Deposit Holders: How to Claim and Track
Fixed deposits (FDs) are one of the most popular investment options for earning a predictable and secure income over a fixed tenure. In India, the interest earned on fixed deposits is subject to tax deduction at source (TDS) as per the Income Tax Act. For many depositors, this TDS can be claimed back as a refund if their total income is below the taxable limit. Understanding how to claim and track a TDS refund is crucial for maximizing returns. This article guides you through the intricacies of the TDS refund process, along with the critical factors involved.
Understanding TDS on Fixed Deposits
TDS on interest income is governed by the prevailing income tax laws of the Government of India. As per the provisions, banks deduct TDS on interest income from FDs when it exceeds INR 40,000 for individuals (or INR 50,000 for senior citizens) in a financial year. The TDS rate chart specifies a deduction rate of 10% if the depositor has provided their Permanent Account Number (PAN) to the bank. However, failure to provide a PAN can push this rate to 20%.
For instance, if the interest earned on an FD is INR 70,000 and the applicable TDS rate is 10%, then the TDS deducted would be INR 7,000.
Eligibility for TDS Refund
A TDS refund is applicable when the total taxable income is below the taxable limit after considering permissible deductions under sections like 80C, 80D, etc. For the financial year 2023-24, the basic exemption limit is INR 2,50,000 for individuals below 60 years, INR 3,00,000 for senior citizens (60 to 80 years), and INR 5,00,000 for super senior citizens (above 80 years).
Example:
Let’s consider Mr. Sharma, aged 58, earns INR 3,00,000 as salary and receives INR 60,000 from FD interest. Assume he saves INR 1,00,000 under section 80C.
– Total income = INR 3,00,000 + INR 60,000 = INR 3,60,000
– Deduction under 80C = INR 1,00,000
– Taxable income = INR 3,60,000 – INR 1,00,000 = INR 2,60,000
Since his taxable income is INR 2,60,000 and exceeds the basic exemption limit of INR 2,50,000, he is liable to pay tax on INR 10,000. If INR 6,000 was deducted as TDS, he needs to pay only INR 1,000 as tax, implying that TDS refund can be claimed on the excess amount.
How to Claim TDS Refund
1. Filing the Income Tax Return (ITR):
The primary step to claim a TDS refund is filing ITR. You must file an ITR corresponding to your income category and include all income sources. Form 26AS should be checked to ensure that the TDS credit reflects correctly.
2. Form 15G/15H Submission:
These forms can be submitted to the bank to avoid TDS deductions if you are eligible. Form 15G applies to individuals below 60 years, and Form 15H is for senior citizens. Misfiling these forms can lead to penalties.
3. Verification and Processing:
Post ITR submission, the Income Tax Department processes it and determines any refund due. The status of this processing can be tracked through the income tax e-filing portal.
Accurate bank account details must be provided for the refund to be deposited. Ensure your bank account is pre-validated on the income tax portal.
Tracking TDS Refund Status
The refund processing can take some time, but the following steps ensure that you can track its status:
– Visit the Income Tax e-filing Portal: Log in using your credentials.
– Go to ‘My Account’: Select ‘Refund/Demand Status’ to view progression.
– TIN-NSDL Website: An alternative is checking through the TIN-NSDL website where status details are updated.
Conclusion
TDS refund is a meticulous process that offers financial relief for an individual whose income falls within the non-taxable slab. Having an understanding of the intricacies involved in claiming a TDS refund allows depositors to effectively maximize their returns from fixed deposits without unnecessary tax burdens.
Disclaimer: Approaching tax and investments requires careful attention to detail and it is advisable for investors to gauge all pros and cons before proceeding with any financial actions within the Indian market.
Summary:
For many fixed deposit holders in India, the deduction of TDS on their interest earnings is a significant concern. If their overall income falls below the tax exemption limit, a TDS refund becomes possible and advantageous. The eligibility hinges on the understanding of income taxonomy and tax slabs, with current exemption limits set at INR 2,50,000 for individuals under 60, INR 3,00,000 for seniors, and INR 5,00,000 for super seniors. The article elucidates the computation mechanism, processing requirements, and precise steps for claiming the refund by filing appropriate ITR forms and submitting needed declarations using Form 15G or 15H. Insight into the refund tracking process through online tax portals is also offered. Investors should critically assess their financial circumstances and seek professional advice if necessary, due to fluctuating tax legislation and individual tax obligations in India.