Tax Deduction at Source(TDS) on Interest -Bank Deposits.
When no tax is to be deducted?
No tax is required to be deducted by Banking Co. or Co-operative Society engaged in banking business or Post Office if aggregate amount of interest credited or paid to the payee in respect of time deposit during the financial year does not exceed the following limit:
If Payee is Senior Citizen 50,000 and others 40,000 In any other case 5,000 is the limit. The ceiling limit as specified above shall not be computed branch-wise if such banking company or co-operative society or public company has adopted Core Banking Solutions (CBS). For the above purposes "time deposits" means deposits including recurring deposits repayable on the expiry of fixed periods.
If the interest on your Deposit exceeds the limit but your estimated taxable income for the financial year is " nil" ,you can request your Bank not to deduct TDS by submitting the declaration in Form 15H in respect of Senior Citizens or in Form 15G for others.
Form 15H / 15G is to be submitted for every financial year and you must quote your Permanent Account Number (PAN).Banks will not accept form 15G/15H without PAN details.
If TDS is not to be deducted, submit the relevant form 15H/15G immediately in the beginning of financial year.
Once TDS recovered and remitted ,Bank can't refund the same. But you can claim for the refund of the TDS from the Tax authorities.
TDS required to be deducted on Interest accrued /credited for Recurring Deposit accounts also. You have to add this interest income for compilation of your tax liability.
Read detailed circular from Income Tax Department.