Help on tds on interest on fdr.

pooja (student cpt) (93 Points)
Replied 13 August 2012

as to the first ques i m sure bank will deduct tds as soon as the interest goes beyond 10000

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 13 August 2012

Originally posted by : Ankur

Hello friends,

Please help me to solve my biggest and everlasting query on TDS on Interest on FDR.

Suppose a person X aged 45 years opened an FD for Rs 106660 on 5.7.2011 for twelve months at 9.25%p.a. compounded quarterly. The bank writes maturity value of Rs. 116874 on FDR which will be due on 5.7.2012. Now on the date of 5.7.2012 the FD is again renewed for twelve months ( Rs. 116874 renewed at 9.25%) maturity value this time being Rs. 128066 due on 5.7.2013. X has no PAN number.

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total interest earned =10214 on 1st FD

out of which 10214* 269/365 is the interest of FY 11-12 = 7528 and balance 2689 belong to 12-13,

now again the FD is put for interest value of 11142,

now from 11142 the interst portion of 12-13 is 11142*269/365 = 8248

now added the two interests for the year 12-13,

1st FD 2689 + 2nd FD 8248 = 10937

as the person has not provided pan card to bank, 20% TDS is applicable on 10937i.e 2188 would be deducted from the maturity amount.

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Now in view of above, please answer my following questions one by one :

1.Q On which dates the bank should deduct TDS on above Interest on FDR? Specially in case of FY 2012-13

2.Q: Why the value due on 5.7.2013 i.e. 128066 is shown without deducting TDS?

3.Q: Can this situation take place that when x goes to bank on 5.7.2013 the bank pays to X the money after deducting TDS which will be less than the actual maturity value i.e. 128066?

4.Q: What if X decides to renew the FD on 5.7.2013 for further one year at 9.25%. will the amount to be renewed be taken as 128066 or the amount obtained after deducting TDS?

Please help to solve this query. It will be a help of God for me. So please help.

thanking in anticipation.

Rohit Srivastava (Article CA Final) (94 Points)
Replied 13 August 2012

bank will deduct TDS as soon as the aggregate of interest accrues beyond Rs. 10000/- at the end of the or at the time of payment whichever is earlier.

Bank will not deduct any TDS for Ist year since the interest is accrued less than 10000 at the end of the f.y.

for II nd year since the interest accrued goes beyond 10000 it will deduct TDS at the end of the f.y.

the payment will be made after deducting TDS.

IF reinvestment is made the bank will deduct TDS if Interest accrues beyond 10000 during the F.Y.

satish kumar Chauhan (accountant) (344 Points)
Replied 13 August 2012

Dear ankur

1. in case of interset on FDR = or > 10000/- during the. F. Y 2012-13, Bnak deduct the TDS @ 10% (if depositer has PAN otherwise 20%)

2. Always M.V shown on the FDR + Principal Value + Interst as the depositer attract the deposiit scheme.

3 Bank will renew fthe fdr on 05.07.12 of Rs. 128066-TDS

Muralidharan (Chartrered Accountants) (115 Points)
Replied 14 August 2012

Dear All

The same problem I also came across with HDFC bank and I took up the matter by mail to Managment along with copies of Fixed Deposit Receipts wherein the maturity value is mentioned. All that they said that they have not visualised this situation and they are trying to insert an amendment in the FD receipt itself that if TDS is there then, the maturity value would be xxxx and if there is no PAN, after the requisite TDS, the maturity value would be xxxxx. Finally the Bankers regretted for their mistake and assured the best services always ? (Whether it is a fact or not to be seen). In fact I noticed that the amount credited was less than the amount shown in the FD Receipt and they also did not send me the TDS certficate in Form No 16A which they ought to have sent it on a quarterely basis which they failed to do so. If only they had sent it, I would have calculated the TDS and arrived at.

The method of calculation is once the interest payable has exceeded the limit, the computer program is designed to the effect that it deducts the amount since u/s 194A, the TDS is required to be deducted once the amount is credited to the account either as a payment or as a liability. Accordingly, the interest calculation for the next quarter or half year or yearly basis depending upon the contract, it will vary which would be less than the amount actually paid to you since after TDS, the amount standing to the credit of the FD amount would be less actually.

This is really a problem and this thin line of calcualtion of interest has not been explained and even the Bank Manager so called M.B.As do not know about this.

B.P. SHARMA (CA) (436 Points)
Replied 14 August 2012

Dear Ankur,

1 Bank will not deduct any TDS for Ist year since the interest is accrued less than 10000 at the end of the f.y.

2 Because theere is no TDS deducted for FY.2011-12.

3 The payment will be made after deducting TDS if interest accrued is more than 10000/- for FY. 2012-13

4 it will be after TDS

CA Gopal Somani (Associate Consultant at Infosys Ltd.) (464 Points)
Replied 14 August 2012

According to Sec. 194A TDS is deducted when the aggregate of interest accrues beyond Rs. 10000/- at the time of credit or at the time of payment whichever is earlier.

1.For financial year 2012-2013 Since in this case interset on FDR is less than 10000/- no need to deduct TDS.

2. Maturity value shown on the FDR is Principal Value + Interst, hence it includes TDS also.

3. since in financial year 2012-13 interest is not more than 10000.00 hence no TDS will be deducted hence amount specified in the FD will be given by the bank.

3 Bank will renew the FDR on 05.07.12 of Rs. 128066 Less TDS.