Fixed deposits (FD) are the most common form of Investment where the individual kept money with the banks on certain predefined contract of period at particular rate of interest.
The FD rates are varies according to banks. The payment of Interest on FD is varies as per the contract i.e. either Monthly, Quarterly or at maturity.
As per the reserve bank of India (RBI) and Income Tax rules if the Fixed Deposit of an individual accrued more than Rs 10000/- as Interest with in a financial year liable to TDS i.e. Tax Deduction at Source(TDS)
TDS is deducted on the Interest amount and not on the principal.
TDS is calculated on the whole Interest amount accrued with applicable rate i.e. 10.00% i.e. if Interest accrued on one lacs deposit with 11% ROI the total Interest amount after a year will be 11000/- .
TDS calculated on whole amount i.e. 11000/- which will be Rs 1100/- and not on Rs 1000/-
RBI has also made it compulsory to submit the PAN card if making Fixed Deposit. The TDS rate on Non PAN account will be 20% of the Interest amount.
How to Avoid TDS Deduction on Fixed Deposit By Banks?
Banks are authorized to deduct TDS on interest income above Rs 10000/- but there are certain procedure through which one Fixed deposit holder can ask bank not to deduct TDS.
If an individual who hold a Fixed deposit account with the banks and his/her Interest income is liable to TDS then he/she can request the bank not to deduct TDS after filling the 15G/15H form.