BANGALORE: Fixed deposits are great investment scheme for people providing a higher interest rate than on the regular savings account. Fixed deposits gives you benefit of getting an interest with a fixed rate until its maturity. It’s a great deal for the one who wants to save; because you cannot withdraw until the maturity time. If you have to, it can be done by giving an advanced notice and having a penalty assessed.

Most people are delighted to earn some income through the fixed deposits, but make a disastrous mistake of not counting it under the taxable income slot.

Make sure you declare your FD income as your taxable income from other sources in the tax-filling form. Fixed Deposits will be taxed at the same rate as the rest of your Gross Income is taxed.

TDS or Tax Deducted at Source is an automated way of tax deduction by the income tax department. The bank deducts money in the form of TDS while the rest of the amount is paid by the person as self-assessment tax. The bank takes in consideration the amount of interest arising from the FD to deduct TDS. If the interest amount for an FD is greater than 10,000 per year, the deduction rate is 10 percent on interest income, only if the bank knows your PAN number. If not, the TDS is deducted at 20 percent on interest income. Senior citizens are exempted from paying TDS on Fixed Deposit interest through a special concession given to them by the Income Tax Department.

It is advisable to pay the tax arising from the interest income of the FD, on an annual basis than paying larger amount of tax at the time of maturity of the FD.  This usually happens because, when you declare the amount at the time of maturity of the FD, your income will be put into the higher tax paying category and you will end up paying higher tax return.

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