Claiming TDS Refunds on Fixed Deposits: A Step-by-Step Guide

Claiming TDS Refund on a Fixed Deposit: The interest you earn from the fixed deposit is added to your annual taxable income and is taxed as per the applicable slab rates you fall into. It comes under the ‘Income from Other Sources’ head in your tax receipts.

In the following two situations, you have to pay tax on interest income from a fixed deposit- 

• When the interest amount is more than Rs. 40,000 in a year for individuals. 
• When the interest amount is Rs. 50,000 or more in a year for senior citizens.

Having said that, there are two additional points that you must remember –

• In the case of non-submission of PAN, the TDS rate is 20%; otherwise, it remains 10%.
• The interest earned by non-residents attracts a TDS of 30%, along with an additional 4% for health and education cess.

Note that the tax is deducted when the interest is credited and not when the FD matures. For example, if you have a fixed deposit for 5 years, the tax will be deducted at the end of every year and not at the end of the maturity period.

However, as an investor you can stop the financial institution from deducting the TDS from the fixed deposit in the following ways: 

• In case the taxable income of individuals is lower than the exemption limit, they can submit the duly filled-up Form 15G to the financial institution at the beginning of a financial year, stating that they do not have any taxable income. 
• People aged above 60 years (senior citizens) are exempted from TDS on FD interest. However, if the interest earned exceeds the threshold of Rs. 50,000 annually, TDS will apply to the FD interest. In case your total taxable income is lower than the exemption limit, but the interest income is more than the threshold, you have to submit a 15H Form to declare that you do not have taxable income. 

Besides the pointers above, if in any other case the banks or financial institutions deduct TDS on FD, you can claim a refund by ITR filing. 

How to Claim TDS Refund on a Fixed Deposit?

To facilitate a smooth and hassle-free TDS refund process, you can claim it online. If you want to know how to claim a TDS refund on a fixed deposit online, follow the steps below:

Step 1: Firstly, you have to visit the website of the I-T department of India and register yourself. 

Step 2: Once you’re successfully registered, download the necessary Income Tax Return (ITR) Forms required for your tax filing.

Step 3: Now, fill in the relevant information in these forms. Afterward, upload them to the website and simply click on ‘Submit’.

Step 4: Once you’ve submitted your return, you’ll get an acknowledgment slip. Verify your return electronically. You can do this using a digital signature, an Aadhaar-based OTP, or even through your net banking account.

Step 5: In case you fail to e-verify the income tax return request, you need to send the hard copy of the same to the I-T department. 

How to Check the TDS Refund on FD Status Online?

Step 1: Visit the IT department website and log in to your ITR account.

Step 2: Browse through the e-file section.

Step 3: Open the ‘Income Tax Return’ tab.

Step 4: Check the ‘View Filed Returns’ section.

Step 5: Select the correct assessment year and open the ‘View Details’ tab.

Step 6: Click on the ‘Refund Status’ to check the details.

Alternatively, you can also check the TDS refund status through the NSDL website. 

Fixed deposit is one of the most preferred investment options for individuals who are not willing to take too many risks with their money. But, like any other investment option, it also entails paying taxes on the earnings when you cross the particular threshold. However, the IT department has provisions to help you apply and get the TDS return to ensure you are not paying taxes twice, reducing your income tax liabilities.