How Housewives Can Help You Save Big On Fixed Deposit Taxes

Fixed deposits (FDs) are a popular and trusted investment option for many. Even with a variety of other investment opportunities available today, financial experts still recommend including FDs in your portfolio. This is because FDs offer guaranteed returns, with multiple tenure options to suit your needs. However, FDs with less than a 5-year tenure have taxable income, and when the interest income exceeds a certain limit, Tax Deducted at Source (TDS) is applied. But did you know that if your wife is a housewife, you can avoid paying TDS on FDs? Here’s how you can use this strategy to your benefit.

How to Save Tax Using Your Wife’s FD Account

According to tax rules, if the interest earned on an FD exceeds ₹40,000 annually, TDS is deducted. However, if your wife is a housewife and doesn’t earn a taxable income, you can open an FD in her name to avoid this deduction. Since housewives often don't fall into any tax bracket, this simple step can save you from paying unnecessary taxes. Even if your wife falls in a lower tax bracket than you, opening an FD in her name can minimize the TDS deduction. To prevent TDS from being deducted, your wife will need to fill out Form 15G .

If you prefer, you can also create a joint FD account with your wife, but to take full advantage of this tax-saving strategy, she should be listed as the first account holder.

The Importance of Form 15G

Form 15G is a declaration form under Section 197A of the Income Tax Act, 1961, for individuals whose annual income is below the taxable threshold and who are under 60 years of age. By submitting this form, the bank is informed that your total income does not require TDS deductions. Filling out this form will ensure that the bank does not deduct TDS on the FD’s interest income.

Form 15H for Senior Citizens

For individuals aged 60 or older, Form 15H serves the same purpose as Form 15G. Senior citizens with zero taxable income can use Form 15H to stop TDS deductions on their FD interest . This form must be submitted to every bank where deposits are held, and it is particularly useful if the interest income from any other source (such as loans, advances, debentures, bonds, etc.) exceeds ₹5,000 annually.

It's recommended to submit Form 15H before the first interest payout to ensure no TDS is deducted from the start. However, even if TDS has already been deducted, individuals can still claim it as a refund by filing their income tax return during the assessment year.