Budget 2019: TDS threshold up for bank, post office FDs

The Budget 2019-20 has increased the Tax Deducted at Source (TDS) threshold on interest earned on such deposits from Rs 10,000 to Rs 40,000. “This will benefit small depositors and non-working spouses,'' the Finance Minister said while presenting the Budget.

Currently, the interest earned on FDs is liable to TDS if the interest exceeds Rs 10,000 a year. While TDS limit for interest earned from bank deposits is raised to Rs 40,000, such interest is still taxable and taxpayers will have to ensure timely submission of Form 15G to prevent TDS deduction if their total income is below taxable limit, said Archit Gupta, founder & CEO ClearTax.

Or depositors have to claim the refund while filing their income tax returns, which is a time-consuming process. Hence, the move will ease tax administration for small savers, said Vaibhav Agrawal, senior vice-president, head of research and ARQ, Angel Broking.

According to Partho Dasgupta, partner, tax and regulatory services, BDO India the TDS relaxation will benefit the middle-class in the form of cash flow management. “Now you will get whatever you earn. You need not pay a single penny to the government or wait for the government to refund the money. The government will not bother those earning Rs 40,000 in interest income,'' he said.

While the move will give relief to small depositors, to enjoy the full extent of the benefit, an investor will have to increase the deposit made to Rs five lakh considering the interest earned is at 6% per annum, said Alok Bansal, co-founder and chief financial officer, Policybazaar.com. “Small investors will not need to deposit 15G for claiming tax benefits, which was the case earlier as even though one was not falling in the tax bracket but earned interest over Rs 10,000,” he said.

It is more of a compliance move and not a lower tax rate, said Anil Rego, founder Right Horizons. “Many make the mistake of assuming no TDS means no tax. But remember, while tax will not be cut during the year, you will still have to pay tax at the end of the year. Or high-income earners will have to pay advance tax,'' he said.

According to Adhil Shetty, CEO, BankBazaar.com, the increase in the TDS threshold will increase savings and boost spending in the economy, driving growth further.