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Money Matters

Tax- Saving Fixed Deposit|Taxes on Fixed Deposit Earning-All you Need to Know|YES BANK

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Fixed deposits (FDs) are one of the most reliable and profitable financial investments. An FD ensures protection of the capital while allowing you to earn interest returns. However, the income from FDs is subject to specific tax laws. As an existing or a potential investor, it is important for you to understand the taxes on FDs and how to minimise them to your advantage.

Things toknow about the taxes on FDs

  • How is the tax calculated on FDs?
    Interest earned on FDs is considered as ‘income from other sources’ and is taxable, according to the Income Tax Act, 1961. The earnings from FDs are added to your overall income, and the tax liability is calculated according to the prevalent tax slab. For example, if you fall under the 15% tax slab, then your FD earnings will also attract the same tax rate. 


  • What is the TDS on FDs?
    The issuer of the FD deducts TDS (Tax deducted at source) on FD at the time of transfer of interest. TDS is deducted when interest is earned and not when the interest is received. For example, you have an FD with Bank A for five years. You earn ₹35,000 as interest annually. In this regard, the bank deducts ₹3,500 (10% of interest earnings) every year for five years, instead of ₹17,500 upon maturity.


  • When do you pay the tax on FDs?
    According to the budget 2019-20, if you earn more than ₹40,000 as interest from FDs, you are liable to pay 10% (if PAN available) or 20% (if PAN not available) as TDS. The upper limit of Rs 40,000 (Rs 50,000 in case of senior citizens) is applicable on aggregrate deposits & not on individual depoosit.
    It is important to understand that the TDS is not the wholesome tax liability on FDs. You have to pay taxes on FD amount, according to your income tax slab.


  • How to reduce taxes on FDs?
    You can use the following methods to minimise taxes on FDs:

  • In case your overall income is below ₹2.5 lakh, you can submit Form 15G and 15H to evade the TDS. This is also known as minimum taxable income. In case TDS is deducted before the submission of the forms, you can claim a refund while filing for Income Tax Return (ITR).

  • You can create FDs in the name of your spouse, parents, etc. According to Section 80TTB of the Income Tax Act, senior citizens are exempt from taxes on interest earnings up to ₹ 50,000.

  • Invest at the right time in a financial year. Ideally, create your FD towards the end or in the middle of a financial year. This will distribute the TDS burden across two years.


YES BANK Fixed Deposits
With YES BANK FDs, you get access to attractive and timely interest earnings. Moreover, you can save taxes by investing in YES BANK five-year, tax-free FD, and still, earn the same interest as regular deposits. 


Some attractive features of YES BANK FDs, include:

  • Opportunity to earn a superior interest rate on your savings. The bank provides higher returns for senior citizens.

  • An auto-renewal option for your FD, allowing you to earn maximum interest via compounding. 

  • Flexibility to choose a tenure, ranging from 7 days to 10 years, that best matches your financial goals. 

  • Easy withdrawals and flexible interest pay options (compounded or credited) to enhance your liquidity.

  • Easy overdraft facility at competitive rates. You can also borrow up to 90% of the amount of your account.

  • Option to break your FD before the term expiry, without incurring any penalties.

  • Easy accessibility to your funds from any of YES BANK’s branches in India.


Choose a YES BANK FD and minimise your tax liability while allowing your funds to grow securely and substantially.


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