How to avoid paying taxes on interest income

Do you wonder why interest earned from your FDs or interest bearing securities like bonds gets reduced due to tax deducted at source? Does it irritate you that tax has been charged even though you aren’t eligible to pay taxes?

Here, we tell you about why TDS applied and ways to avoid this tax deduction if you meet certain criteria.

Why should I know this?

If you are like most Indians, chances are the bulk of your liquid savings are in a bank account or in an FD. Some of us are invested in bonds. While these fixed income instruments are good for guaranteed returns, they are relatively tax inefficient instruments because you end up paying taxes on the interest income that you earn.

This tax is usually deducted at source, and there might be a situation where tax is being deducted even though you are not eligible for paying taxes. This could result in a cash flow problem because your tax outflow is today, but your refund might take many months to arrive.
How much is the TDS on interest from deposits and securities?

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