Ais one of the first “investment” a lot of us make. It’s available at the bank you have an account in and it’s easy to get started with – generally you can open a directly from your net banking account.
While it’s a pretty easy, safe, and predictable place to put our money in, a lot of people get stumped when they face something called ‘’ or .
Your FD– it’s taxable
Thethat you earn on your is taxable. If your bank, therefore, pays you an at the rate of 6%-7.5% on your FD, then this income will be subject to . Furthermore, the bank will deduct a part of this on behalf of the government even before paying the to you.
Now here’s the catch. The bank will deduct@10% of the amount, only if the payable crosses Rs. 10,000. The rate is only applicable to those who have given their PAN details to the bank. If not, then the rate at which tax is deducted goes up to 20% of the earned.
But that’s not the end of your tax payment. If your income is higher and you fall in the 30% tax bracket, you still need to pay the remaining tax yourself.
The question is how are you supposed to do that?
Simple, this gross income when you are filing your taxes under the head “other income”. The tax rate will be based on your existing tax slab.income is supposed to be added to your
IMPORTANT: even if you have a 5 year FD, and you will get the accumulated amount only after 5 years, tax still needs to be paid every year.
It all sounds like too much work! Is there something simpler?
If this sounds like too much work, then there is a simpler option. Just opt forinstead. The growth is not taxable unless you withdraw and then only that amount that you withdraw is subject to short term tax if you withdraw before 3 years. The tax rate will be decided by your current tax slab.
In case your money is untouched for 3 years then the gains are subject to long term indexation to come into the picture and thus, reducing your significantly.126tax, which allows