[guptavis]

On the topic of FD Interest rates, i believe currently Yes Bank offers a 10.6% rate for senior citizens for 1yr and Axis Bank offers 10.4%. I believe these two are the best followed by many banks that give 10.25%.

[Gautam Misra]

Originally Posted by guptavis

On the topic of FD Interest rates, i believe currently Yes Bank offers a 10.6% rate for senior citizens for 1yr and Axis Bank offers 10.4%. I believe these two are the best followed by many banks that give 10.25%.

IMO one should not always go for the one year deposit. Consider the longer periods as well. In fact it is the longer periods which will help you beat inflation to a certain extent.

[guptavis]

Originally Posted by Gautam Misra

IMO one should not always go for the one year deposit. Consider the longer periods as well. In fact it is the longer periods which will help you beat inflation to a certain extent.

I dont know if FD is such a good tool for long term investments. I think land, equity etc are better there. FD scores because of its easy liquidity.
And currently long term FD interest rates are somewhat lesser than ~ 1year.
I think this peak in 1year rates suggest that liquidity is expected to increase by end of 2013.

[sgiitk]

With modern KYC norms opening an account in a new bank is a pain. So unless I stand to gain a lot I will stick to my bank(s).

[carboy]

Originally Posted by sgiitk

With modern KYC norms opening an account in a new bank is a pain. So unless I stand to gain a lot I will stick to my bank(s).

It really isn't. All you need is a PAN Card, an address proof (elec/phone bill in your name etc) and photographs. It takes 10 minutes.

[rohan_iitr]

I have a few doubts regarding FD, IT and TDS. Please help me out.

1. If I transfer some money from my account to my wife's account, what is the technical implication of this transaction ? Will this amount be treated as my wife's income ?

2. My wife is not working, so she is not an income tax payer. But lets say if I transfer some amount to her bank account and this amount is greater than the minimum taxable income, does she become liable to pay income tax ?

3. If she uses this money to open a FD in the bank, will the interest be taxable ? Is the TDS deducted by default ? What can be done to avoid TDS deduction ?

Rohan

[carboy]

Originally Posted by rohan_iitr

I have a few doubts regarding FD, IT and TDS. Please help me out.

1. If I transfer some money from my account to my wife's account, what is the technical implication of this transaction ? Will this amount be treated as my wife's income ?

Nope - it's your income. If your wife earns interest on the money - even the interest has to be treated as your income. If with that money, she buys stock and makes short term capital gains, again the gain should be added to your income for tax purposes.

Originally Posted by rohan_iitr

2. My wife is not working, so she is not an income tax payer. But lets say if I transfer some amount to her bank account and this amount is greater than the minimum taxable income, does she become liable to pay income tax ?

3. If she uses this money to open a FD in the bank, will the interest be taxable ? Is the TDS deducted by default ? What can be done to avoid TDS deduction ?

Both questions answered as part of first Q itself.

You can avoid TDS by making sure that the interest is less than 10000 per year. But that does not mean that you can avoid tax on it. You are still liable to add that interest to your income and file it as part of your returns.

[rohan_iitr]

^ Thanks for the reply.

But is there no way I can legally avoid paying income tax on the interest earned in FD, if the interest exceeds 10k ?

Rohan

[sgiitk]

Originally Posted by rohan_iitr

But is there no way I can legally avoid paying income tax on the interest earned in FD, if the interest exceeds 10k?

This will not be the case with you, but with a form 15G (or is it H) you can ask the bank to stop TDS. This is only available to the non-taxable assessees. This is effectively available for a taxable income of 2L. Add 1L for Sec 80C), and specific exemption of 10k for Savings Interest.

[rohan_iitr]

Originally Posted by sgiitk

This will not be the case with you, but with a form 15G (or is it H) you can ask the bank to stop TDS. This is only available to the non-taxable assessees. This is effectively available for a taxable income of 2L. Add 1L for Sec 80C), and specific exemption of 10k for Savings Interest.

I have opened a bank account in my wife's name. She is not working. I have a FD linked to this bank account.

In such a case, will the bank allow my wife to fill form 15G/H so that TDS is not deducted on interest earned on FD ?

Rohan

[Vasuki]

Originally Posted by sgiitk

With modern KYC norms opening an account in a new bank is a pain. So unless I stand to gain a lot I will stick to my bank(s).

Originally Posted by carboy

It really isn't. All you need is a PAN Card, an address proof (elec/phone bill in your name etc) and photographs. It takes 10 minutes.

+1. KYC is usually a one time process, unless ofcourse you wish to change your details. You can quote your unique generated number, for further use. No need to go thru the drill again.

[sgiitk]

@Vasuki; You are right in theory. Try at a small branch of a PSU bank. They still want an introducer etc. Also, I hear many banks are not accepting Aadhar as proof of id and address.

[carboy]

Originally Posted by rohan_iitr

I have opened a bank account in my wife's name. She is not working. I have a FD linked to this bank account.

In such a case, will the bank allow my wife to fill form 15G/H so that TDS is not deducted on interest earned on FD ?

Rohan

There are 2 different things here
- TDS
- 2nd is lax liability.

I have no idea about 15G/H, but even if the bank doesn't do TDS, you still are liable for tax - even if the interest is just 10 Rs. The 10,000 limit is for Savings Account interest, not for FD interest. All interest of FD is liable for tax irrespective of whether TDS happens or not.

[rohan_iitr]

^ Thanks for the clarification. I was under the impression that interest on FD is taxable only if it exceeds 10k.

What I basically want to know is whether there is any loophole/workaround through which we can legally avoid paying income tax on FD interest.

Rohan

[carboy]

Originally Posted by rohan_iitr

What I basically want to know is whether there is any loophole/workaround through which we can legally avoid paying income tax on FD interest.

No. Other than making sure your total income including the interest falls inside the non-taxable limit. If you are close to that limit, then making sure you are taking advantage of all the tax-saving stuff will ensure that you fall below the limit rather than above.