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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products

Which statement about tax deducted at source (TDS) on interest on bank fixed deposits for a resident individual is correct?

Eligible residents whose estimated tax liability is nil can submit Form 15G or 15H to the bank to avoid TDS on fixed deposit interest. TDS does not depend on total income alone, is not final tax, and is not limited to premature withdrawals.

  1. ATDS is deducted only if the depositor's total income exceeds the basic exemption limit
  2. BForm 15G or 15H can be submitted to avoid TDS if the individual's estimated tax liability is nil and other conditions are metCorrect
  3. CTDS once deducted discharges the entire tax liability on the interest
  4. DTDS applies only to premature withdrawals of deposits

Explanation

Eligible resident individuals whose estimated total tax for the year is nil can submit Form 15G (below 60 years) or Form 15H (senior citizens) to the bank to avoid TDS. TDS depends on interest crossing the bank's threshold, not on the depositor's total income. TDS is only an advance credit, and the interest remains taxable at slab rates.

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