The Fixed Deposit
TDS or Tax Deduction at Source is a taxation done on the interest earnings of a Fixed Deposit. However, not all interest incomes qualify for TDS - when the interest earned from a fixed deposit exceeds INR 10,000 in a financial year, the financial institution taxes it at a particular percentage (usually 10%). This financial institution can be a bank or a Non-Banking Financial Company (NBFC). This tax tends to diminish the returns on investment of the FD.
With a little bit of planning, TDS can be avoided. Listed below are a few practical ways how one can enhance earnings from an investment in an FD of a bank or an NBFC:
Timing the Investment Right
The easiest way to save up on TDS is by opening an FD account at a time when the interest income gets divided over two financial years. In this manner, TDS is not done as the condition for the income exceeding the specified taxation threshold of INR 10,000 is not fulfilled.
Also check :- TDS on Fixed Deposit
Dividing the Corpus and Investing in Multiple FDs
The next way to save up on TDS is by dividing the amount to be invested and parking the same in multiple fixed deposits of different banks or NBFCs. The investor can also invest in multiple FDs of a single financial institution. In this way, the returns do not exceed INR 10,000 and TDS is thus saved. An additional benefit of investing in this manner is that the risk gets minimized.
Tax Deduction at Source can also be avoided by opening a joint fixed deposit account. Here, the individual with higher tax liabilities (i.e. higher income) should not be the primary holder of the joint FD account.
To know more about the remaining practical ways to save TDS, the resource given below should be followed: How to avoid TDS on Fixed Deposits?
Aman is working in the domain of Investment management in one of the top universities. He has published research papers and case studies in Investment and Fixed Deposit marketplace. He is an avid blogger in the domain of Investment management. you can also find him on social networking platforms.