Use an FD Calculator Monthly Interest Tool to Determine the Tax Impact on your Interest Income

An FD calculator can be used to determine the value of your investment at maturity. It is mostly used to determine the returns and interest earned by different FD plans. Also, you can use it to compare the FD rates and tenors across multiple financiers. 

However, you can also use this online tool to know how the taxes affect your interest income. You can follow the below instructions to understand how it is done:

  • Banks deduct a set percentage of your interest earnings as TDS (Tax Deducted at Source) every year. This amount is adjusted against the final payable tax by the Income Tax Department. Therefore, even if TDS isn’t deducted, you will have to pay the taxes according to the tax slab to which your net income belongs. 
  • The interest that you earn through your FDs is totally taxable. A TDS is charged at 10% if your income exceeds Rs. 40000 (Rs. 50000 for senior citizens). You can calculate your interest earnings with the help on an FD calculator. 
  • However, if you have invested in other instruments as well and your net income exceeds a certain amount, then you will have to pay a higher income tax as per your tax slab. To know your tax slab, just add your FD interest income to your total income. 
  • For example, if your net income is greater than Rs. 7.5 lakhs then you belong to the 20% tax slab. Therefore, if a TDS of 10% is already deducted by the bank then you will have to pay only the remaining 10%. 

To reduce the impact of tax on your net returns, you can follow these tips:

Use form 15G or 15H 

If you have already paid the TDS but your income does not fall in the taxable bracket then you can claim this deduction by filling the form 15G. Senior citizens can fill form 15H for receiving the same tax benefits. 

Invest in tax saving FDs 

By investing in a tax-saving FD, you can claim a deduction of up to Rs. 1.5 lakhs as per the Section 80C of the Income Tax Act. However, it comes with a fixed tenor of 5 years and premature withdrawals are not permitted if you invest in this FD. Also, you cannot apply for a loan against tax-saving FDs. 

Divide your corpus in multiple FDs 

You can invest in multiple FDs in such a way that each deposit matures at different time periods. It not only provides more liquidity but you can also gain some tax benefits. Your FDs mature on different dates and your interest income will get distributed across different financial years. 

Therefore, some of your tax liability might be reduced for a particular year. However, your FD returns should be substantial enough to nullify the impact of taxes. For that, you can invest in a high-paying FD like Bajaj Finance that provides an FD interest rate of 6.85%. 

Its multi-deposit facility and flexible tenor range allows you to deposit your savings in multiple FDs of varying tenors. Senior citizens can earn at 0.25% higher interest rate and non-seniors can earn at 0.10% additional rate on investing in its FD plans through an online FD form. 

Moreover, Bajaj Finance provides an efficient FD calculator that calculates the interest earnings of both cumulative and non-cumulative FDs at once which may help you to know the impact of tax on your returns quickly.

An FD calculator is an online tool that is used to know the FD returns. However, you can also use it to understand the impact of taxes on your interest income as it calculates your interest income accurately. If your net income does not fall in any taxable bracket then you can use the form 15G/15H to claim the deductions. You can also invest in tax-saving FDs to save some taxes. However, a smart investment strategy would be to deposit savings in a high-paying FD like Bajaj Finance. 

It also provides the multi-deposit facility that allows you to invest in several FDs at once. This might also reduce your tax liability to some extent. For knowing the interest gains, you can use the FD calculator that is available on Bajaj Finance website.

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