TDS deduction on fixed deposits (FD) occurs when the interest earned on an FD exceeds Rs.40,000 in a financial year. In such cases, banks automatically deduct 10% TDS (Tax Deducted at Source) from the interest. For instance, if the interest is Rs.45,000, the bank deducts Rs.4,500 as TDS, and you would ideally receive Rs.40,500. The deducted TDS is sent to the income tax department. If your total income is below the taxable limit, you could claim a refund by filing an income tax return. Understanding TDS on FD is crucial for effective financial planning.
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