Limits below which tax need not be deducted under section 194A are as follows:
1. No tax is to be deducted if the aggregate amount of interest during the financial year does not exceed Rs. 5,000.
However, the limit of Rs. 5,000 will increase to Rs. 40,000 (Rs. 50,000 in case of Senior Citizen) in case of interest paid/payable by banks and co-operative society on time deposit.
2. For senior citizens the limit is Rs. 40,000 in case of post office deposit made under Senior Citizens Saving Scheme Rules, 2004.
Note: The limit of Rs. 5,000 increases to Rs. 50,000 in case of Interest on compensation awarded by Motor Accident Claims Tribunal.
Time deposits i.e. fixed deposits include recurring deposits repayable on the expiry of fixed periods.
Filing of returns
Even if interest on fixed deposits is below TDS limits and income of the individual is below taxable limit, if the individual is filing a return, then the amount of interest should be disclosed in the tax return.
For senior citizens, deduction upto Rs. 50,000 is available for interest on saving and fixed deposits.