You might be investing in many funds or saving your money so that you can save your tax, in India, government has approved many funds or saving accounts on which we get interest on our investments and those interest are tax free and then your taxable income become less and you will pay less tax.
You may invest in PPF, NSC, and so on to save your TDS on interest income, as interest received from these funds are fully exempt from tax so you don’t have to pay anything in tax. Lets see some norms.
Saving Or Investment Schemes Fully Exempt From TDS
Government Of India has defined some incomes in Income Tax Acts which are fully exempt no matter how much you get as interest of such savings or investments. Like if you invest on any Saving Account, Co-Operative Society Credit funds or any Co-Operative banks and if those bank or society pay any interest to their members then it will be tax free income for them and society cant deduct any Tax Deduction At Source or TDS on interest income earned by you.
You can also invest in Zero Coupon Bonds, Recurring deposits, National Saving Certificates, Post Office Time Deposits as well as Post Office Recurring Deposits, Saving Accounts, and PPF. Once you invest in these funds no TDS on interest income is applicable in these funds.
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Saving Or Investment Schemes Exempt Upto A Limit From TDS
If you invest in above funds then no TDS is applicable on income you get from those investments no matter how much income you get from those funds, but Income Tax Act has also defines some income on which TDS is free if your income is within some limit.
Different funds has different limits suppose you sell a real estate property of more than 50 Lakhs then you need to pay TDS @ 1%.
Government will also apply TDS if your income exceed Rs 10,000 on fixed deposits in a year, But in this you have to keep in mind that if you had made FD in various branch of bank then it will be treated as separate. Suppose you are going to receive 10,000 INR as interest from Branch A , 8000 INR from Branch B and 12000 INR from Branch C, so only 12,000 INR will be taxable and rest is free.
TDS will be applied @ 10% on full income the limit, in above example you have to pay 1200 INR, suppose you are paying rent on any building or so on then if you pay Rent upto 1,80,000 INR then no TDS is applicable but if rent exceed it then TDS will be applicable @ 10%.
Some Important Things to keep in mind
If you think that your Taxable income at the end of year will be less than the income slab then you can fill and submit form No. 15G or 15H, or you can fill this form and submit it to your bank and then no TDS will be deducted and bank will pay you full amount.
It is very important for you to provide your PAN card number so that bank or other can deduct TDS on interest income and submit against your name to government but in case you haven’t provided your PAN card number then TDS will be applicable @ 20% no matter you had submitted form No. 15G or 15H or not, even if your Pan Card number is found incorrect then TDS will will applied @ 20%.