Tax-ability of Interest on Fixed Deposit in Wife’s Name?

Fixed deposit is a good way to deposit your money in the bank. It is an investment that allows you to invest a good amount of money for fixed time period at a fixed rate of interest.  If you are planning to do a fixed deposit in wife’s name then you should know something regarding the process.

Many people do fixed deposits in the name of their non-working spouse in the hope that he/she can reduce his/her total income and hence, he/she won’t have to pay taxes on the amount. The spouse can, in turn, invest the money in a fixed deposit and earn tax-free income. But is this even true? Do these really work? Let’s scrutinize the case.

 

How to invest in your spouse’s name of Plan Income Tax Liability?

It is common to do savings investments in the name of your spouse or any other close relatives like children, father, and mothers. But they do come with some restrictions. You can do this in two ways – one by joint holdings, where the first holder is the person in whose name you are making the deposit and the second by transferring the amount or asset to the person who will be making the investment.

Accounting of TDS deducted on Fixed Deposit in your spouse’s name?

Generally, interest on fixed deposit in wife’s name should not be taxed but due to clubbing provisions, it is taxed under the working husband’s/wife’s tax slab. Now, if the interest on FD in your bank exceeds Rs. 10,000 per annum, the bank will deduct TDS in the name of the first holder, i.e. your non-working spouse. If you are able to provide PAN of your spouse then the TDS will be deducted at 10%, otherwise, it is 20%. This TDS will be provided against your spouse’s PAN number. Thus, even though due to clubbing provisions, the interest on FD is based on the working spouse’s tax slab, the TDS will be listed against the non-working spouse’s PAN number, barring the other spouse from claiming the TDS while filing ITR.

Even though the working spouse can’t claim the TDS, he/she can file an ITR with 0f income, for the non-working spouse, asking for a refund.

How to claim TDS deducted on Fixed Deposit in Name of Wife?

To claim the TDS deducted the ITR should be filed with 0 (zero) income you will need the form 16A of ITR. You can claim the TDS by the following process.

  • You will need the unique TDS certificate number. This 6 digit number appears on the right-hand top corner of the TDS certificates.
  • Mention the financial year of deduction in the columns of the form.
  • Mention the total tax deducted and enter the needed details in Form 16A. Always round of to the nearest rupee.
  • Amount out of (6) claimed this year. This is the same process as mentioning the tax deduction at source or TDS. This amount cannot exceed TDS and round off to the nearest rupee while you are putting the amount.

Follow this procedure to get a full return on the TDS deducted from the fixed deposit in your wife’s name.

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