What do you do with your savings? Know when tax will be deducted on your money and when it will be saved.

If you keep your savings in FD So the interest received from this is taxed. That is, you will have to pay it to the government as per the tax slab. If the interest income on Fixed Deposit (FD) reaches Rs 40,000 (Rs 50,000 for senior citizens) in a financial year, your bank deducts TDS (Tax Deduction at Source). This means that you do not get the full principal amount along with the interest amount but instead get it after deducting it. This deduction is actually made under TDS. Banks levy 10% tax on earnings above Rs 40,000. However, if the total amount of interest received by you is less then no tax will be deducted on it. FD interest income is added to your annual income while filing tax returns. (Also read- She is a housewife, neither does she have a job nor a business, yet she has to file income tax return! Know the rules)

TDS and Income Tax: What are these…

TDS and income tax are two separate Although these are different things, they apply to income only. Income tax is levied on annual income. This includes salary, capital gains and other other sources of income. Whereas, if we talk about tax deducted at source of income i.e. TDS, it is imposed to prevent tax evasion. While paying salary, interest, rent, professional fees, TDS is deducted before payment. This deducted amount is immediately sent to the government.

Recurring Deposit i.e. RD- Recurring There is no tax benefit on the income earned from investment in deposits. TDS is deducted on the interest earned on this. If you are getting interest more than Rs 40,000 then TDS will be deducted at the rate of 10%. No TDS will be deducted on interest up to Rs 40,000. Whereas if you invest in PPF i.e. Public Provident Fund (PPF), then no tax of any kind will be deducted on the interest received on it. It completely comes under the scope of EEE i.e. it is counted under the Exempt-Exempt-Exempt (EEE) system. Therefore, the money deposited in it, the interest received from the deposited money and the amount withdrawn are all tax free. For more such information related to women and personal finance, you can click here.

Keep one thing in mind, investment has its own rules and regulations. You should allocate your savings money as much as possible among various schemes etc. That means all eggs should not be kept in one basket. Deduction of tax is a government rule. To avoid this, do not adopt wrong methods and even when you invest in the right methods, know completely about the scheme. Like PPF has its own benefits but with it comes a lock in period. The rules of RD and FD are also different. Therefore, wherever you invest your savings, invest only after proper research.

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