FD interest income can be checked through bank statements, Form 26AS, the Annual Information Statement (AIS) or the Taxpayer Information Statement (TIS).
After considering all these sources, the FD interest must be added to the income earned and shown under the head ‘Income From Other Sources’ in the ITR.
Resident senior citizens opting for the old tax regime can claim a deduction of up to ₹50,000 under Section 80TTB of the Income Tax Act, 1961, on interest received from savings accounts, fixed deposits or recurring deposits. The deduction claimed cannot exceed the interest earned.
Under the old regime, the principal amount deposited in an FD for a period of five years can also be claimed as a deduction under Section 80C of the Income Tax Act, 1961, subject to an overall limit of ₹1.5 lakh.
Tax on FD interest is calculated as per the taxpayer’s respective slab rate, and the tax implications may differ based on the regime chosen, the age of the taxpayer and residential status.
Any tax deducted at source (TDS) from the interest income is reduced from the overall tax liability. Adjustment of TDS against tax payable may result in a reduction of tax payable, or a refund.
Under Section 194A of the Income Tax Act, 1961, interest income on FDs is subject to a TDS of 10%, and taxpayers receive the payment net of TDS. TDS under Section 194A need not be deducted if the interest does not exceed a specified threshold limit. On submission of Form 15G or 15H, as applicable, interest on FD could be exempted from TDS deduction, subject to certain conditions.
Bank interest income is an important part of ITR filing that is often overlooked. Even though the interest amount may be immaterial, non-reporting or inaccurate reporting may lead to notices and additional tax and interest liability.
While interest income is taxed under applicable slab rates, deductions are available for FD interest for senior citizens under the old regime, helping taxpayers save on tax outflow and increase disposable income.
