Fixed Deposit more than 5 years lock period will be exempted under section 80c of Income tax act 1964 but the interest accrued from that fixed deposit is taxable. It is taxed under the head income from other sources. If the interest on is not shown in the individual return it will be shown in 26AS (TDS receivable) as the banker has already deducted on individual behalf.
The following are the rules regarding income tax on interest on fixed deposit:
- The interest income accrued on the fixed deposit will be exempted up to 10,000 (interest income on Fixed deposit exempted up to Rs. 40,000 w.e.f.F.Y.2019-20)
- The rate of TDS under section 194A of income tax act 1964 is 10%.
- If PAN card number of the individual is not available the TDS rate will be 20%.
- The interest amount from all the branches of the bank will be aggregated to specify the above-said limit (10,000/-) in F..Y.2018-19 it will be increased limit (40,000/-) in F.Y.2019-20
Note: Form 15G (Individuals other than senior and very senior citizen), Form 15 H (Senior and very senior citizens) can be submitted to the banker to make sure that your interest income is not taxable when the income does not exceed the basic exemption limit. An individual can submit form 15G if the person’s income is less than 2,50,000/-. Form 15H can be submitted by a senior citizen if the income is less than 3,00,000/- and a very senior citizen can submit if income is less than 5,00,000.