Unexpected ‘surprises’ aren’t always pleasant, especially when it comes to our savings and investments. One surprise to watch out for is when we finally close our Fixed Deposits, our treasured investment source. While we expect a shower of money from it, what we could end up getting is just a drizzle; thanks to TDS. Yes, Tax Deducted at Source (TDS), if not taken into account, could play havoc with our financial plans. While there’s nothing you can do about being taxed, there are ways to reduce the amount you pay. Knowing what these avenues are, could ensure that you have a steady stream of funds at your disposal when you need it.
TDS saving tips
A Fixed Deposit is a relatively safe way to help your investment grow as your returns are fixed, plus banks offer decent interest rates on these deposits (depending on the tenure and amount). But, TDS can suck away at your money without you even realising it. It’s an important factor to keep in mind while opening a Fixed Deposit. Listed below are a few suggestions that could help you carry home a fat wallet when you finally close your FD.
- Time it right – Timing is key to almost everything in life and Fixed Deposits are no exception. Spending a few hours timing your FD could boost your ultimate return. Currently, TDS is charged if the interest earned on an FD in a financial year is in excess of Rs. 10,000. So, a simple calculation could help you keep the earning under this threshold. For example, opening an FD for 1 year in the month of November 2015 will split the interest between two financial years, ensuring savings on TDS.
- Break it up – A break up in life can be harsh, but a break up in terms of FDs is a smart move. Dividing the investment amount into smaller portions and splitting them between different banks can ensure that the interest stays below Rs. 10,000 in a year, thereby eliminating TDS from your life. For those who wish to have a relationship with just one bank, opening different accounts in the same bank is possible by utilising certain provisions available. And just like a relationship, a breakup might seem hard to do but is perhaps the only way forward.
(Don’t forget to reconcile all your accounts at the end of the financial year and make sure that your taxes are in order.)
- Don’t forget the forms – There is no point planning and visualising things unless one officially implements them. The government has two forms designed for TDS, Form 15G & 15H. An account holder must use these forms to let the government know that he/she is not eligible for TDS, thereby ensuring that the full amount of their investment is available to them.
Here’s a handy tool: FD Calculator
Arming yourself with this information could ensure that there are no nasty surprises when you finally decide to withdraw money from your trusted Fixed Deposit.