Understanding TDS on Fixed Deposits: Why TDS Was Deducted Even After Submitting 15G or 15H Form

When it comes to tax deductions at source (TDS) on fixed deposits (FDs), many investors wonder why TDS was still deducted even after submitting the necessary forms such as Form 15G or 15H. This article aims to clarify the potential issues that could have led to this situation and offer an in-depth explanation.

Common Issues Leading to TDS Deduction

There are several potential reasons why TDS was deducted on FDs despite submitting the required 15G or 15H form. These issues include:

Incorrect or Incomplete Information: If the information provided in the 15G or 15H form was incorrect or incomplete, it could lead to the deduction of TDS. This applies to details such as the individual's PAN number, income, and other crucial data. Delay in Submitting the Required Form: If the form was submitted late, it might take some time for the tax authorities to process it, during which TDS could have been deducted. Failure to Update Form Details in Database: If the form details were not updated in the tax authorities' database, the deduction of TDS might occur due to outdated or incorrect information.

TDS Deduction on FDs: Threshold and Tax Implications

Fixed deposit interest income is subject to TDS if it exceeds a certain threshold. Here are some key points to understand:

Interest Income Threshold: If the interest income on your FDs exceeds the basic threshold of Rs. 2.5 lakhs (250,000) annually, submitting Form 15G or 15H does not ensure exemption from TDS. In this case, TDS will be deducted at a lower rate. Exemption Threshold: If the income is below the taxable limit and exceeds the basic exemption limit of Rs. 250,000, TDS will not be deducted. However, if your interest income is below this limit, it is advisable to submit the appropriate form to avoid any deductions. Total Income Consideration: If an individual's total income exceeds the basic exemption limit, they should not submit Form 15G or 15H. Instead, they should pay taxes on their interest income as part of their annual tax filing process.

Compulsory TDS Deduction on FD Interest Income

Even after submitting Form 15G or 15H, it is possible that TDS is still deducted on FD interest income if the income from interest on FDs exceeds the Rs. 250,000 exemption limit. Here are some additional points to consider:

Interest Income Exceeding Rs. 250,000: If the interest income from FDs is more than Rs. 250,000, the submitting the form 15G or 15H is not applicable. In such cases, TDS will be deducted compulsorily. Verification Process: The tax authorities may verify your income details and may still deduct TDS if discrepancies are found. Refund Process: If TDS is deducted and not required, you can claim a refund through the tax authorities' refund process.

In conclusion, TDS on FDs can be a complex issue, and various factors can lead to its deduction even after submitting the necessary forms. It is important to ensure that all the details are correct and up-to-date to avoid any unintended TDS deductions. If you face any issues or have questions, it is advisable to consult a tax professional or contact the relevant tax authority for clarification.