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4 Easy Ways to Avoid TDS on Fixed Deposits

 It is a very safe way of investing money and the creation of a separate account is not mandatory. There are many types of FD schemes available in the market and an investor can choose one depending on his needs. There is a regular FD, which has a tenure ranging from one week to ten years. The investor can choose to stay invested for a certain period. There is also a tax saving FD, wherein an investor invests money just to save tax. In Special FD, the money can be invested for a period of 333 days, 399 days or 555 days. There is also the recurring deposit scheme in which the investor can fix a certain amount of money every month for a fixed tenure. The Floating FD is also famous in which the investor can choose to invest for a market based interest rate and the interest rate is renewed automatically with the change in base rate.

The interest earned in Fixed Deposits is taxable under income from other sources. If the interest rate earned in FD comes to more than 10,000 in a particular financial year, the TDS would be applicable at 10% plus the 3% education cess, a total of which comes to 10.3%. However there are a various ways on saving TDS on Fixed Deposits. One of the most popular ways of saving TDS on Fixed Deposits is by submitting Form 15G or 15H. If an investor submits Form 15G in which he states that he is not entitled to any taxable income then the bank will not deduct TDS on the interest that he earns. For citizens above the age of 60 years, the form is 15H.

Another very easy way to avoid TDS is to divide the deposit into separate banks in such a way so that the interest earned in each bank is not more than 10,000 in each financial year. If a person is a little cautious about timing of his FD in a correct way he can avoid the TDS. He should take care of the fact that the interest in each financial year does not exceed 10,000 in the financial year. For instance a 12 month’s fixed deposit of 1 lakh can start in September as the financial year ends on 31st March.

To avoid attracting TDS, an investor can start one fixed deposit from his own personal bank account and another one from the HUF account as both will be treated separately.

Fixed deposits are all time favorite with the investors promising very high returns.

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