Now no Income tax at your source will be deducted with a condition that the banks will have to make provisions for interest on fixed deposits and not paid to the depositors actually. This was clarified by the Finance Minister on 7th march. A fixed deposit is meant for those investors who want to deposit a lump sum of money for a fixed period (for a minimum period of 15 days to five years and above, thereby earning a higher rate of interest in return). Investor gets a lump sum (principal + interest) at the maturity of the deposit.
Bank fixed deposits are one of the most common savings scheme open to an average investor. Fixed deposits also give a higher rate of interest than a savings bank account. The facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan) facility on the amount deposited, premature withdrawal before maturity period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks are subject to control of the Reserve Bank of India.
Tax savings fixed deposits are the easiest tax savings vehicles for section 80C. They might not be the best investment options for your financial growth when compared with insurance policies and tax saving mutual funds – but are simple, fast and give you peace of mind. Till now, tax was supposed to be deducted even if the provisions were made for just the interest payment. But this was creating problems for the banks using the Core-Branch Banking System (CBS) which had enabled user to manage their accounts from any place. This was very convenient for the customers but was creating a lot of mess for the banks to manage money.
The Indian Banks Association representing the income tax department had said the banks which are using the CBS are calculating the interest on fixed deposits daily or monthly basis but unable to calculate the numbers in case of provisioning accounts for records only. This has been overcome by add the interest per financial year or at periodic intervals.
This request was considered by the Central Board of Direct taxes for finding the solution for this. Its has been stated by the CBDT that, as no credit is given to the depositors while calculating interest on fixed deposits on the respective time interval then the tax should not be deduced at source on provision of interest.
The official declaration by the Control Board was “In such cases, tax shall be deducted at source on accrual of interest”.
Related posts:
- Latest Bank Fixed Deposit Rates – FD Rates
- Tax Saver Fixed Deposit (FD): Tax Benefits
- How to Avoid Tax Deduction at Source (TDS) on Bank Fixed Deposit?
- Why Fixed Income Will Grow in 2011
- Good News for Investors! Government Increases Interest Rates on PPF
Sponsored Links
Comments on this entry are closed.