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Tds on 3 year fd

Nitin (BE) (83 Points)

13 August 2013

Dear Experts,

I have very simple query. As per my knowledge if interest income on FD is greater than 10,000 per annum then TDS will be deducted.
My query : with 9% interest per year and if I deposit 1 Lac for 3 year Deposit. Then at the end of 3 year i will get 9,000 x 3 = 27,000.

Please note i do no have any other income. So i am confused as per year income will be 9,000 which is lower than 10,000 (and not applicable for TDS). But i will be whole amount at the end of 3 years as 27,000 ( which is greater than 10,000 ).

So will TDS be deducted on 27,000 after 3 years on maturity or no TDS will be deducted as 9,000 per year is lower than 10,000.

Regards
Nitin

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5 Replies

Nitin (BE) (83 Points)
Replied 13 August 2013

Experts any answers will be apreciated.
Please help.

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Mihir (Wealth Manager) (5293 Points)
Replied 13 August 2013

If your FD is a 3 year lock-in, then your interest accrued shall be deemed reinvested. Additionally, banks follow compound interest and not simple interest. Bank will deduct TDS if the interest is likely to exceed Rs. 10,000/- pa.

For example Rs. 100,000 invested

1st year interest on 100,000 - Rs. 9,000/-

2nd year interest 109,000 - 9,810/-

3rd year interest on 118,810 - 10,693/-

Total interest is not Rs. 27,000 but Rs. 29,503/- which is almost Rs. 10,000/- pa

Nitin (BE) (83 Points)
Replied 13 August 2013

Originally posted by : Mihir
	If your FD is a 3 year lock-in, then your interest accrued shall be deemed reinvested. Additionally, banks follow compound interest and not simple interest. Bank will deduct TDS if the interest is likely to exceed Rs. 10,000/- pa. For example Rs. 100,000 invested 1st year interest on 100,000 - Rs. 9,000/- 2nd year interest 109,000 - 9,810/- 3rd year interest on 118,810 - 10,693/- Total interest is not Rs. 27,000 but Rs. 29,503/- which is almost Rs. 10,000/- pa

Thanks Mihir for clear answer.
So as per above scenario tax will be deducted on the interest earned on 3rd year on interest 10,693 /- ( no TDS for 1st and 2nd year interest).
My main intention of question is wheter tax is deducted on overall sum of interest earned at the End of 3 years (9,000+ 9,810 + 10,693 =29,503) or on the interest per year ?

CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 13 August 2013

in the 3 year if u have total income below slab then file form 15-G if you are non senior citizen or form 15H if your senior citizen in 3 year then no tds will be deducted by the bank.

Nitin (BE) (83 Points)
Replied 13 August 2013

Originally posted by : M.com CA,CS FinTushar Sampat
	in the 3 year if u have total income below slab then file form 15-G if you are non senior citizen or form 15H if your senior citizen in 3 year then no tds will be deducted by the bank.

Thanks Tushar,
Currently i don't have any income but may be next year onward i will have salary income. In that case should i fill form 15G ?