Calcutta, March 4: Senior citizens can now rest easy: they no longer have to worry about paying tax deducted at source (TDS) on their large fixed deposits.
All those above 65 years of age can now keep a little over Rs 1 lakh in one branch of a bank or a post office without having to submit Form 15H — to avoid paying taxes. On deposits that earn them interest at the rate of 9.5 per cent, the maximum they can keep is Rs 1,05,263.
The change proposed under Clause 44 of the Finance Bill 2007-08 — introduced in the Lok Sabha last week — ends the hassle for senior citizens who stash away their retirement kitty in such deposits.
The bill amends Section 194A of the income-tax act, which allows tax to be cut from interest before it is paid to the deposit-holder — called tax deducted at source.
Till this financial year, anybody who earned up to Rs 5,000 as interest didn’t have to pay a tax on it under Sub-Section (3) of Section 194A of the act. The budget raises that limit to Rs 10,000 from 2007-08.
However, there is no change in the case of fixed deposits with finance firms or corporate entities, where the tax-deduction limit stays at an interest of Rs 5,000. This is also true of “interest from securities”, such as bonds and debentures.
Once the finance bill is passed, senior citizens won’t have to rush to the bank or post office every year to submit Form 15H — unless, of course, their annual interest earnings happen to be more than Rs 10,000.
But, there is a rider: the interest should be paid by a “banking company or a co-operative society engaged in carrying on the business of banking” or by a post office “under any scheme” framed by the Centre.