Who does this affect?
Someone who is in 30% salary tax bracket and has FD of 7.5 lakhs and above.
(FD interest rate: 7%)
(30% of (7% of 750000) ) – (10% of (7% of 750000) ) = 10500 needs to be paid in taxes.
By default 10% TDS is deducted on the FD. The person has to pay the 20% balance in taxes. If the FD amount is greater than 7.5 lakh the interest difference is greater than 10K which is taxable. Hence 234B and 234C penalty will be levied.
The 234B penalty for delay in filing tax may be beyond control of assesse. Eg: Bank delay in providing TDS certificate for the year. Usually banks take 2 months after march 31st to update Form26AS and provide TDS certificate to the customer. This delay is unavoidable. Hence the 234B should not be levied in such cases? It takes 2+ months for banks to figure out the TDS but the govt expects us to guess the potential interest we will earn for a year?
Estimating the interest earned is difficult if the FD keeps changing either due to new FD being opened or premature closure. Doing this in July15,Sep15,Dec15 just adds to the complexity of filing taxes for a salaried or non business person.
The complexity of calculating advance tax for salaried class and non business persons exceeds the benefit. Simplifying it will aid in better adherence to tax laws.When advanced taxes are not needed for senior citizens then why cant the same be done for salaried and non business class?
If someone has a FD only income and interest is received only at end of FD he will have no cash in hand to cover the advance tax payments. Example parents. They would have made FD and if they have no cash in hand how can they pay for FD interest that will mature in future?
Also for a salaried person in 30% bracket, his FD TDS decution at 10% are not enough to cover the 234C tax law. He will have shortfall on all advance tax payments. End of 31st july if he has no outstanding tax payable does he still have to account for the shortfall he encountered in paying advanced taxes for FD interest? Wouldnt everyone in 30% not paying advance tax fall under the category? Why cant we instruct the bank to pay 30% TDS to avoid the headache.
It is the rule set by IT Dept regarding advance tax. You have to follow.
There are two ways to file the IT return related to interest income on FD. One is at yearly basis and another at maturity. Choice is your’s. But filing on yearly basis is wise thing. No need to wait for their update of TDS. Instead, you can ask the banks for interest certificate, based on that you can file IT return within due date (assuming 10% TDS).
TDs rate also set by IT Dept. Hence, nothing in your hand 🙂 But thanks for sharing your practical difficulties.