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Fixed Deposit Taxation
- Earning of fixed deposit interest is fully taxable under “Income From Other Sources”.
- Tax on FD depends tax bracket of an individual.
- TDS is applicable on interest on FD when an amount interest increase by Rs 40000 per annum, 10% TDS will be deducted by bank at time of credited interest annually. In case of senior citizen limit is Rs 50000.
- The bank will deduct 20% TDS if the PAN information is not available with the banks.
- If an investor have an annual income of Rs 300000 or less then there would be no TDS. Your bank would not deduct TDS even if interest income is more than Rs 40000. Ensure you submit 15G or 15H so that you claim the interest income with TDS.
- Bonds are fixed income investment instrument generally issued by government, institution, corporate bodies for raising fund.
- Earning of bonds are interest and capital gain while filing ITR interest is denoted under “Income From Other Sources” and capital gains/losses are denoted under “Income From Capital Gains/Losses”.
- Taxation on bond depends upon type of bond and duration of bond. For Listed Bonds, tax according to tax slab is applicable if holding duration is less than 12 months and if holding duration exceeds 12 months tax is 10% without indexation. For Unlisted Bonds, tax according to tax slab is applicable if holding duration is less than 36 months and if holding duration exceeds 36 months 20% tax without indexation is applicable.
- Interest on bond is taxable as per tax slab, 10% TDS on interest will be deducted on all the bonds which have coupon rate.
Debt Mutual Fund Taxation
- Debt mutual funds are mutual funds which invest less than 35% of it proceeds in equity shares.
- Earnings of Debt Mutual Funds are capital gains while filing ITR capital gains/losses are denoted under “Income From Capital Gains/Losses”.
- Holding duration would not matter in case of debt mutual funds post April 1, 2023 as taxation will apply as per respective tax slabs.