Fixed deposits are the first line of investments for most people. A risk-averse investor might be happy with the returns on FDs provided their capital is safe. Such investors can explore company fixed deposits which offer higher interest rates (1-2%) as compared to bank FDs.
However, many investors are still wary of how much of their earnings will be taken away by the taxman. They are unsure of the calculations and ways to save tax. One way to compensate for the tax burden is to find a high-yielding FD which is not only safe but also high paying.
Way to Calculate TDS on Fixed Deposit
You need to pay TDS only if your annual income is above the threshold for the minimum taxable income of Rs. 2.5 lakhs as per the Income Tax Act. This simple calculation will tell you how TDS on fixed deposit is calculated.
Example 1: You are below 60 years of age and earn Rs. 20 lakhs as yearly income. You are liable to pay 30% tax on the taxable income after accounting for all standard deductions like 80C, D, E, and others. Now, if you have an FD interest earning of say, Rs. 1 lakh, it easily crosses a threshold of Rs. 40,000 in a financial year. This Rs. 1 lakh will be taxed at the same 30% with the applicable surcharge and cess.
Before this, a TDS of 10% will be deducted from the interest income. So you will pay a TDS of Rs. 10,000 on interest of Rs 1 lakh.
Example 2: You are above 60 years and earn Rs. 1.5 lakhs annually from FD interests and other amounts from other investments. In total, your annual income does not cross Rs. 2.5 lakhs. Then you are exempted from paying TDS on this interest amount. To ensure the bank or financial institution does not deduct TDS, you need to submit Form 15G or H to them declaring the income is less than the threshold. This has to be done at the beginning of each financial year.
Compensate TDS with Higher Interest Rates
You can check the best interest rates with the FD interest rate calculator on Bajaj Finserv or any financial institution website. Strict comparisons on rates will show that Bajaj Finance FD offers one of the highest interest rates. It pays higher rates than any bank on the same tenor.
The interest rates are also among the highest in the market –
|Tenor in Months||Minimum deposit (in Rs.)||Cumulative||Non-Cumulative|
|12 – 23||25,000||8.00%||7.72%||7.77%||7.85%||8.00%|
|24 – 35||8.15%||7.88%||7.93%||8.00%||8.15%|
|Special tenors scheme|
The second criteria of safety and guaranteed payouts is also fulfilled as Bajaj Finance FD has been rated highly with CRISIL’s FAAA/stable rating and ICRA’s MAAA/stable rating. This is one of the highest ratings among company FDs and is the best way to evaluate different company FDs.
This should clearly give you a sensible and safe alternative to bank FDs. You need not worry about losing money on TDS as you can earn much higher interest rates. Company FDs will provide a TDS deduction of up to Rs. 5,000 only. However, this should not stop you from taking advantage of various features Bajaj Finance FD has to offer, such as-
- Auto-renewal – Go for the auto-renewal feature that will avoid the hassles for re-creating the same FD. Also, you earn an additional 0.10% upon renewal.
- Loan against FD – Another useful feature for immediate liquidity is a loan against FD up to 75% of the value of the loan.
- Multi deposit – This is an interesting feature which allows you to deposit one lump sum and break it into multiple FDs by choosing your tenors for each amount. It proves to be very helpful to ladder your investments across different tenor and interest rate buckets.