Arnav Pandya
There are a few changes on the Tax Deducted at Source (TDS) front that will impact the way in which investors actually go about managing their money. While this does not result in a change in the final tax implication it impacts that manner in which the tax is deducted while paying out the amounts on the investment and this could result in a lesser amount coming to the investor than before. For those who have to pay tax this figure would be adjusted against the tax liability but for those whose income does not fall into the taxable bracket it could mean a bit of additional work to ensure that the TDS is avoided. Here is a closer look at the entire issue.
TDS on recurring deposits
TDS is currently made on interest earned on fixed deposits when the figure here crosses Rs 10,000 in a year for deposits in a particular branch. This does not cover recurring deposits wherein the investor puts in a regular sum of money each month for a specified period of time and then receives the entire amount with the interest earned at the time of maturity. Now the recurring deposits have been brought under the TDS ambit which means that if your earnings in a year from recurring deposits are more than Rs 10,000 then there will be an amount deducted and the net figure would be available to you at the time of the payout. This will impact a lot of people who have recurring deposits because in many cases these deposits are for longer time periods wherein the interest earned keeps piling up.
TDS on amount invested in a bank
There is also a change that has been made on the manner in which the limit of interest earned would be calculated for seeing whether TDS has to be made applicable to the investor. Earlier this was done if the interest earned was Rs 10,000 or more in a particular branch. Now this restriction of branch has been removed and it includes the entire bank and hence if there are multiple deposits at different branches then this would be considered together for the purpose of calculating whether there has to be a TDS made on the interest. This will impact all those who have spread around their money into different branches to get around the earlier guidelines.
TDS on deposits with co-operative banks
There was also a situation wherein investors who were members of a cooperative bank did not have TDS deducted on the interest on their deposits. This segregation has been done away with and it has been clarified that the cooperative banks would have to make the TDS on all their depositors. This will bring a lot more of the investors under the TDS fold and they can expect to get a net receipt of their earnings which will require them to make the necessary adjustments at the time of filing their income tax returns. The other option is to actually submit Form 15G/Form 15H if their income is below the taxable limit and no TDS needs to be deducted.
(The author is a certified financial planner)
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