Fixed Deposits

During my career spanning over 34 years in State Bank of India, I was posted in a number of branches but banking was mostly simple and straight forward during those days. However, over the period and with changing of various rules and regulations, branch banking has become very complex. At times changes are so huge and abrupt that even the operating officials find it very difficult to keep pace with them. It is neither possible nor desirable to jot down the changes happened so far in banking space but I thought it prudent to mention the changes pertaining to treatment of interest payable on Fixed / Term Deposits to protect the interest of the depositors. But before I move forward, I would like to tell you the problem faced by my mother because of certain changes in IT rules involving payment interest on Fixed / Term Deposits.

My mother (eldest daughter and one of the nine children of my grandparents) received Rs. 2.50 lakh as her share post disposal of the ancestral home located at Kandi (WB). She gave some money to her daughters and grandchildren and kept an amount of Rs.2.00 lakh in UCO Bank (located in our village) as Fixed Deposit. During one of my visits to my parents when I came to know about it, I told her that a form (Form – 15H) had to be deposited as otherwise Bank would deduct tax while paying the amount on maturity. It was my responsibility to remind her about that but I forgot it totally. Resultantly, when the maturity proceeds were paid to her, Bank deducted a cool 20% of the interest payable to her (As she has no PAN.). When she told me about that I was quite sure that Form – 15H was not submitted by her. Anyway, she has now applied for a PAN Card. I am hopeful that she will get refund of the amount deducted at source, once the claim is submitted to the IT authorities.

In view of the aforesaid, I would like to dwell upon the issue of Fixed / Term Deposit interest vis a vis the depositors, as under:

  • If you are not a tax payer: You must be aware that interest earned on Fixed / Term deposits is taxable. Please, therefore, submit Form – 15G (applicable to people below 60 years of age) / 15H (For senior citizen) at the time when you are keeping money in Fixed Deposit and then every year till its maturity. Even during every renewal, you need to submit the relevant form. If you fail to submit the form, the following amount will be deducted at source:
  • 10% of the accrued interest if PAN is submitted.
  • 20% of the accrued interest if PAN is not there.
  • If you are a tax payer: If you are a tax payer, you have to get your PAN registered with your account. In that case, the deduction will be 10% of the interest payable. My suggestion to you is that you need not to submit Form – 15G / 15H and let the deduction at source happen. Please take such deductions into account while submitting your IT Return. If your applicable IT slab is >10%, you have to pay more tax to IT authority. In case you have already paid more tax, you will get the refund of extra amount paid. Needless to add that, for the last few years, IT authority has become very prompt in paying refunds.
  • If money is deducted but you do not have a PAN Card: As mentioned, if you have not submitted Form – 15G / 15H, 20% of the accrued interest will be deducted from the maturity proceeds of your Fixed / Term Deposit. As you are not a tax payer, it is likely that you do not have a PAN Card. If you go to the branch to claim for refund of your legitimate money, Branch Head will express his / her helplessness as he / she has no authority to refund the money so deducted by debit to Government account. At that juncture, you are left with two options – (i) To forget about your genuine claim and (ii) To be ready to wait for some time and to complete the formalities, as under:
  • To apply for a PAN Card.
  • To obtain a Certificate of Tax Deducted at Source from the Branch.
  • To submit the appropriate Income Tax Return after the end of Financial Year.

It will take some time but you will get back your legitimate money.

If you find the information relevant, please spread awareness among people you know, particularly those who are not tax payers.

N.B. Please note that the treatment of interest payable on Recurring Deposits is same as that of interest payable on Fixed / Term Deposits.

Pulak Kumar Sinha

Pulak Kumar Sinha

I am a retd. General Manager at State Bank of India. I am a Certified Associate of Indian Institute of Bankers and have a P.G. Diploma in Management from All India Management Association (AIMA).
I joined SBI as a Probationary Officer in 1981. Since then, I have worked in various capacities as Branch Manager, Regional Manager and Deputy General Manager at different places. My specialised areas are Credit and General Banking.
I also was Chairperson of Reserve Bank of India Working Group on Evaluation of Feasibility of Aadhaar based Biometric Authentication as Additional factor of Authentication for card present transactions and related issues.
Pulak Kumar Sinha

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