Manage Resources 10 Common Myths Surrounding Fixed Deposits and Earned Interest

Fixed Deposits, also called as Term Deposits, are one of the most traditional investing options. While we may be hearing a lot of noise around Mutual Fund SIPs, Liquid, Balanced and Debt Funds, Stock Picking, Tax Free Bonds, PPF, EPF etc, the fact of the matter is that nothing can beat the assurance and simplicity of a Fixed Deposit. Though tax inefficient and not the best returns provider, fixed deposits do deserve their own pie in your portfolio. Tell me whether there is any other investment option you know which is as simple, assured, liquid, monitoring free and risk free – all rolled in one – as a Fixed Deposit? There is actually none. It does come at a price of tax inefficiency and slightly lower returns, but in quite many cases – returns may not be the only criteria to decide on your investments.So, if you have started to feel happy that all that chunk of Fixed Deposits lying almost unattended in your bank accounts is now justified, let me throw a word of caution here. Your Fixed Deposit is earning interest. Bank may be deducting some tax as well (TDS). But you may be liable for more tax. And if you have not been paying that, you might be in for deep trouble. Yes, at the time of filing your Income Tax Returns, you are liable to calculate the additional tax that you need to pay from your Fixed Deposit interest – and then pay it as well. This may be completely over and above the TDS that the banks may have deducted. If you have been ignoring that, then I am sure you also understand that ignorance of law is never an excuse. Inefficiently managed interest accrued from your Bank Fixed Deposits can actually land in you in deep trouble with the taxman.Let us remove some of the common myths surrounding the Fixed Deposits and the interest accrued out of them:Myth 1Fixed Deposit interest is hidden from the taxmanFact 1All Banks report the interest accrued against your PAN Number to the IT Department. So, gone are those days when banks and their branches were disconnected. Today, in this interconnected world of PAN and Adhaar, there is no way you can escape from the prying eyes of the taxman.Myth 2Bank has already deducted TDS – so, you don’t need to pay any more tax

Fact 2Banks deduct only 10% of the interest earned as TDS, or 20% if you have not provided the PAN Number to the bank. But you may actually be liable for more. It all depends on your total income in the financial year. If you fall in the 30% tax bracket, then you are liable to pay 30% tax on the interest earned from fixed deposits – after adjusting for 10% or 20% TDS that may already have been deducted by the bank. If you are in the 20% tax bracket, and the bank has deducted only 10% TDS, then you are liable to pay another 10% tax on the interest that you have earned.Myth 3You have submitted Form 15G/H – so there is no tax liabilityFact 3Form 15G/H has a very specific purpose wherein you are confirming to the bank that you are not likely to fall even in the 10% tax bracket in the current financial year – and hence you are requesting the bank not to deduct TDS. But if that does not turn out to be true by the end of the financial year, you got to pay tax as per the tax slab you fall in.Myth 4Your interest is less than Rs 10,000 in a financial year and thus there is no tax liabilityFact 4Even INR 1 interest earned from Fixed Deposits is liable to be taxed, unless of course you fall in 0% tax slab. This exemption of Rs. 10,000 is not applicable on Fixed Deposit interest. This exemption is only available for interest earned out of the money idling in your savings account. So, you are liable to be taxed even if your interest income is less than INR 10,000. The only benefit you have is that the bank will not deduct any TDS till the interest crossed INR 10,000. Even if that is the case, you will need to pay the applicable tax at the time of filing ITR.Myth 5I have a recurring deposit. Interest is not taxable hereFact 5100% incorrect. Whether it is FD or RD, every single rupee of interest earned is taxable as per your current tax slabMyth 6I have invested in a 5 year Tax Free FD. It will not be taxed nowFact 6Quite contrasting to their name, Tax Free FDs are actually NOT tax free. Yes, they don’t help you save tax from your interest income earned out of the fixed deposit. They do help you save tax by showing the principal investment under Section 80C, just like you may save tax by showing EPF or PPF investment under Section 80C. However, every single rupee of interest is taxable as in any normal fixed deposit.Myth 7National Savings Certificates (NSC) or Kisan Vikas Patras (KVP) are tax freeFact 7Again, none of this is true, and every single rupee of interest is taxable as in any normal fixed deposit.Myth 8Senior Citizen Deposit Scheme is Tax FreeFact 8Again, none of this is true, and every single rupee of interest is taxable as in any normal fixed deposit.Myth 9I have invested in an FD in my wife’s name. So, I am saved of any taxes.Fact 9Money gifted to a spouse does not attract tax. But if that money is invested, the income it generates is clubbed with the income of the giver and taxed accordingly. If a husband has invested in fixed deposits in the name of his wife, the interest will be taxed as his income. So, better avoid wasting your time and effort.Myth 10I have invested in my child’s name. So, I am saved of any taxes.Fact 10Money gifted to a child does not attract tax. But if that money is invested I the name of aa minor child, the income it generates is clubbed with the income of the giver and taxed accordingly. If a father has invested in fixed deposits in the name of his minor child, the interest will be taxed as his income. So, better avoid wasting your time and effort. In case of children though, there is a small exemption of Rs 1,500 per year per child for a maximum of two children.Calculate the Tax payable on FD interest1. Calculate your total interest income from all the Fixed deposits in a financial year. Say, it is INR 50,0002. Find your tax slab (based on your total income – which includes all sources of income, including FDs). Say, it is 20%3. Based on 1 and 2 above, calculate the tax payable on FD interest. It will be 20% of 50,000 = INR 10,0004. Check Form 26AS to see the TDS already deducted. Assuming it was deducted at the standard rate of 10%, it will be INR 5,000

5. Additional Tax payable at the time of filing ITR = INR 10,000 (as per 3) – INR 5,000 (as per 4) = INR 5,000How do I file Tax for interest income?Report the total interest as “Income from other Sources”In the ITR form, it will be added to your total income and will be taxed according to the tax slab you will fall into.Avoid trying to be smart with the IT DepartmentIn today’s interconnected banking system, avoid the following, play safe and live a peaceful life:1. Do not try to submit Form 15G/H just to avoid TDS. Giving a false declaration can be considered a very serious offence – which could even lead to jail up to 2 years. This information makes its way to the Form 26AS of the individual. One can only imagine what will happen to an investor whose Form 26AS indicates submission of Form 15G or 15H at multiple banks and an income that exceeds the basic exemption limit. In any case, even if you are able to avoid TDS by the bank, you are liable to calculate and pay the total tax while filing ITR. Playing such games is just not worth the effort.2. Do not waste your time and energy splitting your bank FDs across multiple banks or branches. Every account is connected through your PAN number.3. Avoid trying to save tax by investing in the name of your spouse or minor children. There is a clubbed income provision which leads to all the interest earned by your spouse or child to be clubbed with your income and taxed accordingly. In some cases, it might help investing in the name of your parents, because the clubbing provision does not apply there. However, just ensure that the parents income and tax liability should not go up because of that.Having a clear understanding of Fixed Deposits and tax liability arising out of the interest income from the same will keep this investment option the way it was designed – simple, guaranteed, liquid, monitoring free and risk free. You will be able to enjoy its true charm then!

The Invention of Man That Is Destroying the World

Money, finance, the economy, and the impending end of the world are all linked and the reason is obvious. Greed and wealth creation is first and foremost in the minds of most who see nothing wrong with destroying the environment and taking whatever they can from others. Their goal is hoarding as much as they can while showing the rest of the world how great they are. What they don’t know is how poor they are.

Following my reincarnation and with a strong link to the Spirit of the Universe it has led me to see the big picture. At a time shown to me between lives it called to take me away from the world and teach me what life is about.

It’s a simple story but one that would be above the heads of most who try to understand it in the light of religious teachings and the greed that has impacted the earth. This is our only planet on which we can live and yet man is destroying it at a great rate of knots to make money and stick it in the bank or some investment portfolio.

Can they in all honesty believe that this is the purpose of their lives. Yet it would seem that it is exactly what they were put here to do.

My first commission is to tear down the wall of blindness and recover God’s people who are caught up behind a wall of lies and confusion. In fulfilling that goal it was important to understand how and why things have developed to this point. We are on the brink of destruction and the earth and all life on it is at risk.

That wall is built by man’s imagination and false gods that have been created to explain life and death. In their efforts to be powerful men devised heaven and hell and used them as tools to rope others in to their opinions and dreams. If they could convince others of their own convictions, then for them they became true.

That’s why religions are now so powerful and rich. The leaders know nothing of the Spirit and they push money ahead of common sense. Through trade and then domination of nations riches became more important than life itself and all one needs do is look at how many suicide when they face financial ruin.

Money is nothing! It has no place in the function of the world except that the Spirit is using it to bring life to an end. Those hungry enough to be caught in its web are overseeing the disaster. That’s according to the prophecies in the Old Testament that promise this day would come.