Interim Finance Minister Piyush Goyal has given a big relief to lakhs of bank fixed deposit investors. Union Budget 2019 has proposed that the threshold for TDS on interest earned on bank fixed deposit to be raised to Rs 40000 as compared to Rs 10000 earlier.
The earlier limit was set almost couple of decades ago and needed to be revised taking into account inflationary pressures and also the fact that tax slabs and income levels of the individual had changed over a period of time. This raise is seen as a much needed correction.
This will reduce the administrative hassles of the bank fixed deposit investors. As per the extant rules, if the interest earned on bank fixed deposits exceeds Rs 10000 in a financial year, then the bank is supposed to collect TDS at the rate of 10 per cent and remit it to central government. However, this does not end the tax liability of the individual.
The bank fixed deposit holder is expected to assess his tax liability taking into account his income tax slab rate and pay additional tax wherever applicable. If the bank fixed deposit holder does not have taxable income, he can declare so by submitting Form 15G or Form15H applicable. For example an individual with total income of less than Rs 2.5 lakh in a financial year can submit Form 15G clearly stating his income and the interest received to avoid the TDS.
Earlier the banks used to deduct tax at source if the individual earning more than Rs 10000 in interest has not submitted required form. Now the banks will come into action only in cases where the interest exceeds Rs 40000.The TDS status of an individual assesse can be seen online by accessing Form 26AS.
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