TDS on Interest Paid on Deposits- FY 2019-20 (AY 2020-21)

The rates of TDS on interest paid on deposits for residents and non–residents (NRIs) for  FY 2019-20 (AY 2020-21) are covered in the article. TDS is applicable on interest on recurring and term deposits (fixed deposits). The interest paid for the financial year for the bank as a whole is considered even if deposits are with different branches of same bank.  TDS becomes applicable as and when the interest crosses the threshold.

TDS on interest paid on deposits – Residents

• In  FY 2018-19 (AY 2019-20),the threshold limit applicable for non-deduction of TDS was Rs. 10,000 for all persons other than Senior Citizens. In FY 2019-20 (AY 2020-21) the same has been increased to Rs. 40,000.
• If the interest pain on deposit crosses threshold limit, TDS on interest paid on deposits will be applicable on the entire amount of interest and not on the exceeded amount alone.  
• If the interest paid on deposit exceeds Rs. 50,00,000, surcharge is applicable as per rules.

Submission of Form 15G/15H to avoid TDS on interest paid on deposits

As per the Finance Act 2019, a rebate of Rs. 12,500 is available for tax payers with taxable income upto Rs. 5 lakh. Hence, those resident customers whose taxable income is only  upto 5 Lakh can now submit Form 15G and Form 15H provided interest paid/ accrued to the customer for the FY 2019-20 (AY 2020-21)  is less  than or equal to Rs. 2,50,000 (Rs. 3,00,000 for senior citizen and Rs. 5,00,000 for super senior citizen).

TDS on interest paid on deposits – Non-Resident Individuals (NRIs)

In the case of non-resident individuals (NRIs) interest on all types of ONR deposits are considered without any basic exemption. The interest paid on NRE/FCNRB deposits are exempted from TDS.

@ Surcharge and Health and Education Cess are not applicable when TDS is at the rate as applicable per DTA.

# Rate of TDS is inclusive of Surcharge and Health & Education Cess as applicable.

Benefit of Double Taxation Avoidance Agreement for Non-Residents:

The benefit of DTAA can be availed by NRIs residing in those countries with which India has  such agreements. To claim double taxation relief, customer shall produce Tax Residency Certificate along with declaration in Form 10F and PAN. If tax Residency certificate is not furnished for the relevant financial year, tax at normal rates will be deducted by banks.

Frequency for Issue of TDS certificate

TDS deductors have to issue TDS certificates downloaded from www.tdscpc.gov.in to all deductees where PAN is available on a quarterly basis in Form no. 16A. The certificates can be downloaded only after filing the quarterly TDS returns (Form no. 26Q and 27Q). The due date for filing TDS returns and issuing TDS certificate are as provided below: