10% on FD interest over ₹40K (₹50K senior). Form 15G/15H avoids TDS for low/NIL tax. Seniors: 80TTB ₹50K + 15H. NRO interest 30% (Section 195). Reconcile Form 26AS.
SECTION 194A (interest other than securities): (1) BANK FD/RD interest: 10% TDS. (2) THRESHOLD: ₹40,000 per FY (₹50,000 for senior citizens). (3) NO PAN: 20%. (4) POST OFFICE deposits: similar. (5) CORPORATE FD: 10%. (6) NRO interest: 30% (Section 195, not 194A). EXAMPLE: ₹6L FD at 7% = ₹42K interest. (a) Over ₹40K threshold. (b) TDS 10% × ₹42K = ₹4,200. (c) Claim credit in ITR. SAVINGS account interest: NO TDS (but taxable, 80TTA ₹10K deduction).
FORM 15G/15H: (1) FORM 15G: for individuals < 60 years, total income below taxable limit. (2) FORM 15H: for SENIORS 60+, no tax liability. (3) SUBMIT to bank at FY start. (4) Bank does NOT deduct TDS. (5) DECLARATION that income below exemption. CONDITIONS: (a) 15G: total income < ₹2.5L + tax NIL. (b) 15H: senior with NIL tax. STRATEGIC: low-income individuals + seniors submit 15G/15H to avoid TDS lock-up. AVOID false declaration (penalty). File at each bank separately.
SENIOR CITIZEN INTEREST: (1) 194A THRESHOLD: ₹50K (vs ₹40K general). (2) 80TTB deduction: ₹50K interest deduction (FD + savings + post office). (3) Form 15H to avoid TDS if NIL tax. EXAMPLE: senior ₹8L FD at 7.5% = ₹60K interest. (a) 80TTB deduction ₹50K. (b) Taxable interest ₹10K. (c) If total income below exemption: Form 15H, no TDS. STRATEGIC: seniors benefit from higher threshold + 80TTB + 15H. SCSS + FD interest optimized.
194A COVERS: (1) Bank FD + RD interest. (2) Corporate FD interest. (3) Post office time deposits. (4) Interest on loans given. NOT 194A: (1) SAVINGS account interest (no TDS, but taxable). (2) NRO/NRE (Section 195 for NRI). (3) Securities interest (194 / 193). (4) Interest under 194A < ₹40K threshold. EXEMPT entities: banks paying to other banks, etc. STRATEGIC: FD interest TDS at 10% if over threshold. Reconcile Form 26AS. Claim credit or refund.
194A STRATEGY: DEPOSITORS: (1) PROVIDE PAN (avoid 20%). (2) Form 15G/15H if low/NIL tax — avoid TDS. (3) SENIORS: 80TTB ₹50K + 15H. (4) SPREAD FDs across banks (each ₹40K threshold) — but interest still taxable, just defers TDS. (5) CLAIM TDS credit in ITR. (6) REFUND if total tax < TDS. (7) SAVINGS interest: 80TTA ₹10K (non-senior). (8) RECONCILE Form 26AS + AIS. STRATEGIC: TDS is advance tax — reconcile + claim. Seniors maximize 80TTB + 15H. Low-income: 15G avoids lock-up. CONSULT CA for large FD portfolios.