How to Avoid TDS on Fixed Deposits and Save Money

One of the most attractive features of investing in fixed deposit (FD), is how safe they are. They’re a relatively easy way of investing, with little risk involved. They also give good returns after the maturity period. But there is a catch.

If the interest that you accrue over a period of time reaches to be over 5,000 rupees a year, then your bank will automatically deduct tax from that income. This is known as Tax Deducted At Source or TDS, where the bank will deduct tax at source on your fixed deposit.

This can be quite large when you have a large amount of money invested in fixed deposit. But there are ways you can avoid paying an unnecessary tax.

Fill Out Your Forms

If you don’t want the bank to automatically deduct your interest for TDS, then fill out a declaration form saying that your income is less than the taxable limit.

For those of you under 60, ask your bank for Form 15G. If you’re 60 and higher, then you’ll need Form 15H.

If you forget it during your time of investment for any reason, you can submit it at any time. TDS is usually taken off every quarter of the year.

Be Strategic With When You Invest

If you want to invest a large sum of money which you know is going to be taxed, there’s a way you can avoid tax.

How TDS on fixed deposit calculated is through a full financial year, which starts on the 1st of April and ends on the 31st of March.

By investing through the middle of the year, or off season, you can ensure that the interest that is collected is calculated for only a part of the year. That means the total interest won’t be calculated, since the banks will only calculate the interest for that particular financial year.

By investing through this, you can effectively get the same interest, while avoiding any unnecessary taxation.

Break Up Your Investments

Another way of avoiding TDS is to ensure that you don’t have a huge lump of money sitting in one deposit.

A larger amount of money will generate a larger interest, but that can attract a potential TDS. By breaking up the money that you do have, through investing in several banks and accounts at once, you can get a smaller interest which won’t be noticed by TDS, but will still be substantial when you add up.

This is one of the best methods if you want to know how to avoid TDS.

Breaking up your money by investing in a number of banks can be quite effective and smart in the long run. Not only are you avoiding tax, but you’re also getting a very diverse portfolio, which can help you sustain yourself from any losses that you may incur from other avenues of investment. This gives you a relatively stable platform to pursue other investments which could help generate further income.

One of the best ways of investing your money in Fixed Deposits. It’s no surprise that it’s been the favourite of the Indian populace for a long time. That isn’t likely to change either. If you’re looking to invest in something stable and one that guarantees returns, then you should definitely take a look at fixed deposits. You can also avoid taxation once you take the necessary steps.

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