It comes as a pleasant surprise for deposit holders with the government announcing a big change in TDS (Tax Deducted at Source) rules. This change will be implemented from September 20, benefitting millions of small and medium investors who consider FDs safe and sure-return instruments.
What Are the Current TDS Rules on FD?
The banks used to charge a 10% TDS on the interest earned in the fixed deposits when the interest income was beyond ₹40,000 for ordinary investors and ₹50,000 for senior citizens. In the case of persons without a PAN card, the TDS levied was 20%, whereas even if the investor’s entire income did not come under taxable bracket, TDS would be deducted on their FD interest. This used to cause cash-flow problems.”
New Change in TDS Rules
From September 20, major relaxation in TDS rules is expected to be given by the government. Under the new guidelines, TDS will not be deducted at source up to higher thresholds of interest income, thus letting small depositors and senior citizens respectively enjoy their FD earnings, free from any unwanted tax deduction. The liquidity and hence, returns, of many an investor, would thereby improve with this being implemented.
How FD Investors Will Reap the Benefits
The revision of the rules on TDS is more rewarding for:
- Small investors, often placing their savings in fixed deposits.
- Senior citizens, depending mostly on FD interest for their expenses during the month.
- Non-taxable income earners, to whom refunds were previously delayed after filing ITRs.
Henceforth, the higher tax exemption limit will allow more FD holders to enjoy earned interest without any immediate bank deductions.
Reactions From Investors
The decision was widely welcomed with many experts calling it a path to investor-friendly banking. Financial advisors believe this decision will inspire more investors to put their money in safe instruments such as fixed deposits, thus strengthening long-term savings.
Conclusion
Deposit on whose name is deduction of less TDS and in whose hands there’s higher exemption threshold, would get better returns and better financial management from the depositors. While shaping small investors and senior citizens in India, this very thing is indeed an encouragement for them.