Filing your Income Tax Return accurately is essential, especially if you have earned interest from Fixed Deposits during the financial year. While FDs offer secure returns, the interest earned is taxable, and many taxpayers unknowingly fail to report it. Here is a step-by-step guide on how to file your ITR if you have FD income.

Understanding the taxability of FD interest

The interest you earn from FDs is classified as "Income from Other Sources" in the Income Tax Act. Whether you reinvest interest (in Cumulative FDs) or receive it periodically (as Non-Cumulative FDs), it is fully taxable and added to your gross income. Tax is applicable depending on your income tax slab rate.

Collect interest income details

Start by collecting the total interest income for the financial year from all FDs across banks. You can get this information from:

• Interest certificates issued by your bank
• Online Banking services
• Form 26AS, which reflects TDS deducted

Use an FD calculator to estimate total interest, especially if you have reinvested FDs or opened them mid-year. This ensures your interest income is reported correctly and helps with advance tax planning.

Check TDS deducted

Banks deduct Tax Deducted at Source if your FD interest exceeds Rs. 40,000 in a year (Rs. 50,000 for senior citizens). The TDS is typically 10% if your PAN is up to date. This deduction reflects in your Form 26AS. However, TDS does not mean your tax liability is settled. If you are in the 20% or 30% tax slab, you need to pay the balance tax while filing your return. But if you fall below the taxable limit and TDS is still deducted, you can claim a refund.

Use the correct ITR form

For most salaried individuals with FD income, ITR-1 is applicable. This form is meant for individuals having:

• Salary/pension income
• One house property
• Income from other sources (like FD interest)
• Total income up to Rs. 50 lakh

If you have multiple income sources or capital gains, you may need to file ITR-2.

Claim deductions for Tax-Saving FDs

If you have invested in Tax-Saving FDs (with a five-year lock-in), you can claim a deduction under Section 80C, up to Rs. 1.5 lakh. Ensure the investment is in your name and made before March 31 of the financial year to be eligible. Note that while the investment qualifies for the deduction, the interest earned on Tax-Saving FDs is still taxable.

Pay self-assessment or advance tax if needed

If, after calculating total tax (including FD income), you find that additional tax is payable, do so using self-assessment or advance tax facilities. Delaying this leads to interest penalties. 

Conclusion

Filing your ITR with FD income is straightforward if you are organised. Use your bank statements, Form 26AS, and an FD calculator to accurately estimate interest. Do not forget to declare all FD interest, even from Tax-Saving FDs, and claim deductions where applicable. This ensures you remain compliant and avoid unnecessary penalties.