Individuals who are looking for investments should consider tax and TDS along with risk and return of an investment. This is because returns may differ depending on the taxation of financial instruments. Income earned from most of the investments are subject to TDS. Say, for example, salary income, interest earned on debentures attract TDS. So one should be aware of tax and TDS applicability and how it can be avoided.
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Below mentioned some income and investments where TDS is applicable:
TDS on Salary Individuals who have income above the taxable limit will see the employer deduct TDS on total income, including income other than salary after considering all deductions and exemptions. TDS is applicable as per his income slab. The same can be avoided if investments are made under 80C, 80D of Income Tax Act by providing investment proof of the same. The company will issue a TDS certificate also known as Form 16A at the end of the financial year.
TDS on Interest Income Banks deducts TDS on interest income earned above Rs 10,000 in a year. Taxpayers who fall in higher tax bracket need to pay tax as per liability. Individuals with lower income can claim for the TDS by submitting form 15G or H, whichever is applicable. Also, one can avoid TDS by opening a fixed deposit in the different banks where interest earned in a single bank should not exceed Rs 10,000. Note that the TDS will be applicable on the complete amount not only of the exceeded amount. TDS is applicable at 10 per cent if PAN is not submitted with the bank, 20 percent TDS will be applied.
TDS on EPF Withdrawal TDS will be applicable if Employee Provident Fund is withdrawn before five years of contribution. However, TDS will not be deducted for an amount below Rs 50,000 from June1, 2016. TDS is not applicable when individuals transfer Provident Fund from one account to another Provident Fund Account. TDS will be deducted at 10 per cent if Form-15G or 15H is not submitted provided PAN is submitted. In absence of PAN, it is 20 percent of the amount.