TDS limit on bank interest raise for senior citizens

Finance Minister Arun Jaitley has given a big relief to the lakhs of bank fixed deposit investors. Union Budget 2018 has proposed that the threshold for TDS on interest earned on bank fixed deposit and recurring deposits to be raised to Rs 50000 for senior citizen as compared to Rs 10000 earlier. The rate of TDS, however, is kept constant.

The earlier limit was set almost couple of decades ago and need to be revised as the tax slabs and income of the individual 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 if exceeds Rs 10000 in a financial year, then the bank is supposed to collect TDS at the rate of 10 percent 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 50000

The TDS status of an individual assessee can be seen online by accessing Form 26AS.