FD: The central government has implemented several significant measures, including an income tax exemption in the Union Budget for the financial year 2025-26, which will provide direct benefits to the general populace. Additionally, modifications have been made to the TDS deduction regulations, which are crucial to comprehend.
Government has increased the TDS applicable
The government has increased the TDS applicable to interest earned by senior citizens on bank fixed deposits, offering them considerable relief. With this initiative from Finance Minister Nirmala Sitharaman, the income generated through senior citizen schemes and bank fixed deposits will effectively be doubled.
Senior citizens will get more benefits
The central government has raised the TDS deduction threshold on fixed deposit interest for senior citizens from Rs 50,000 to Rs 1 lakh. Consequently, TDS will not be applicable on earnings up to Rs 1 lakh from interest. It is important to note that this new threshold will take effect from the beginning of the financial year 2025-26, specifically on April 1. Banks typically provide an additional 0.50 percent interest to senior citizens on their fixed deposit schemes compared to the standard interest rate, which is expected to enhance their earnings.
Furthermore, investments in popular schemes such as the Post Office Senior Citizen Savings Scheme are anticipated to rise. Currently, if senior citizens earn more than Rs 50,000 in interest from bank fixed deposits, they are required to pay a TDS of 10 percent. For instance, if an individual earns Rs 80,000 in interest during a financial year, they would need to pay Rs 8,000 in TDS.
However, starting April 1, 2025, a 10% TDS will be applicable on interest earned exceeding Rs 1 lakh. It is also noteworthy that the TDS deduction limit on interest income for the general public has been increased. In her budget address, Finance Minister Nirmala Sitharaman announced that the TDS limit on interest from fixed deposits for non-senior citizens has been raised from Rs 4,000 to Rs 50,000.
If an individual’s annual income falls below the taxable threshold, they can claim TDS in their income tax return. Additionally, the government has raised the TDS deduction limit on dividend income.