FD, TDS: Fixed deposits (FDs) are the top choice for keeping savings safe after retirement. Putting money in a bank or post office gives a reliable interest rate that easily takes care of medical bills, household costs, and other minor expenses. But many senior citizens worry about TDS (Tax Deducted at Source) deductions on the interest they earn. The good news is that starting April 1, 2025, senior citizens will be fully exempt from TDS on interest up to Rs 1 lakh, and with some smart planning, they can even save on interest that goes beyond that limit.
When does TDS apply?
TDS is taken out on interest earned from FDs in banks and post offices if the total exceeds Rs 50,000 in a year. This rule hits senior citizens hard since they usually put away large amounts in FDs to ensure good returns.
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The Rs 1 lakh limit can differ by bank
Now, any FD interest up to Rs 1 lakh from a single bank or post office in a financial year is free from TDS. This rule applies to public, private, and cooperative banks, as well as post offices. For instance, an FD of Rs 12-13 lakh at an 8% interest rate would yield Rs 1 lakh in interest each year without any deductions. However, if the interest from one bank goes over Rs 1 lakh, TDS could be deducted.
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How can you steer clear of TDS?
Senior citizens have a few simple ways to avoid TDS:
– Fill out Form 15H: If your total income is below the taxable threshold, TDS won’t be deducted if you complete and submit Form 15H at the bank.
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– Take advantage of Section 80TTB: Under Section 80TTB of the Income Tax Act, senior citizens can get a tax exemption on interest income up to Rs 50,000 each year.
– Keep your PAN updated: It’s crucial to have your PAN card current with your bank. If your PAN isn’t registered, the TDS rate could be higher.
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– Spread out your interest: Setting up multiple FDs and distributing the interest across various accounts can also help you avoid hitting the TDS limit.
For many seniors, the interest from FDs is their main income source to cover medical expenses, household bills, and lessen their reliance on others. Therefore, TDS deductions impact their monthly income. The government has introduced exemptions like Section 80TTB to provide relief to senior citizens, ensuring they remain financially secure during this stage of their lives.