TDS on Fixed Deposits
Fixed Deposits (FDs) are one of the most popular investment options in India, offering guaranteed returns and safety. However, the interest earned on an FD is subject to taxation. To ensure tax compliance, banks and financial institutions deduct Tax Deducted at Source (TDS) on FD interest when it exceeds certain limits.
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What is TDS on Fixed Deposit (FD) Interest?
TDS on FD interest is a tax that banks or NBFCs deduct before crediting interest into your account. This ensures that tax is collected at the source of income itself. The deducted amount is deposited with the Income Tax Department on your behalf and can be adjusted while filing returns.
How is TDS Calculated on FD Interest?
TDS on fixed deposits is calculated on the total interest earned in a financial year, not on the principal amount. For example, if your FD earns ₹60,000 in interest in a year and the TDS rate is 10%, the bank will deduct ₹6,000 before paying you. If you fall into a higher tax slab, you may need to pay additional tax while filing returns.
TDS Rates for General vs Senior Citizens
- For individuals below 60 years – TDS is deducted at 10% if the annual FD interest exceeds the exemption limit.
- For senior citizens (60 years and above) – They enjoy a higher exemption limit, and TDS applies only if interest crosses that threshold.
- If PAN is not provided, TDS is deducted at 20%, regardless of age.
Exemption Limits for TDS on FD Interest (FY 2025–26)
- For individuals below 60 years: No TDS if total FD interest is up to ₹40,000 in a financial year.
- For senior citizens: No TDS if total FD interest is up to ₹50,000 in a financial year.
These exemption limits help small depositors avoid unnecessary deductions.
How to Avail TDS Waiver on FD Interest
If your total income is below the taxable limit, you can avoid TDS deductions by submitting self-declaration forms. This ensures you receive your full FD interest without tax cuts at the source.
Purpose and Use of Form 15G and Form 15H
- Form 15G: For individuals below 60 years whose total income is below the exemption limit.
- Form 15H: For senior citizens who want to avoid TDS deduction on their FD interest.
These forms must be submitted to banks at the beginning of each financial year to prevent TDS deductions.
TDS on Bank FD vs Non-Bank (NBFC) FD
While both banks and NBFCs deduct TDS on FD interest, the rules are the same under the Income Tax Act. However, NBFCs may have different interest crediting cycles, which can impact when TDS is deducted. Always check your NBFC’s TDS policy before investing.
Example to Understand TDS Deduction on FD Interest
Let’s say you invested ₹10,00,000 in an FD at 7% annual interest.
- Annual interest = ₹70,000
- Exemption limit = ₹40,000 (for general taxpayers)
- Taxable interest = ₹30,000
- TDS @ 10% = ₹3,000
- Thus, instead of ₹70,000, you will receive ₹67,000, and ₹3,000 will be deposited with the government.
Taxability of FD Interest Below the Income Tax Limit
Even if TDS is not deducted due to exemption, the interest is still taxable under “Income from Other Sources.” You must declare it in your Income Tax Return (ITR) and pay tax if your total income exceeds the basic exemption limit.
Fixed Deposit Variants and Their TDS Treatment
Fixed Deposit – 60 Months
Long-term FDs like 60-month deposits attract TDS in the same way as regular FDs. The bank deducts TDS on accrued interest each year, not at maturity.
Senior Citizen FD
These FDs provide higher interest rates and a higher TDS exemption limit of ₹50,000 per year. Senior citizens can also claim deductions under Section 80TTB for FD interest up to ₹50,000.
FD for Individuals Below 60
For regular investors, TDS applies if annual FD interest exceeds ₹40,000. Submitting Form 15G helps if income is below the taxable limit.
FD for Minors
Interest from a minor’s FD is clubbed with the parent’s income. If it crosses exemption limits, TDS will be deducted accordingly.
FD for HUFs
Hindu Undivided Families (HUFs) can also invest in FDs, and TDS is applicable if interest exceeds the ₹40,000 threshold.
FD for Sole Proprietors
Since proprietorship income is taxed as individual income, TDS rules are the same as for individuals.
Using Investment Calculators to Estimate Returns
Investment calculators help you estimate FD maturity values, interest earned, and possible TDS deductions. By entering the deposit amount, tenure, and interest rate, you can plan your tax liabilities better and decide whether to submit Form 15G/15H.
I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.
Frequently Asked Questions (FAQs)
- Is TDS applicable if my income is below the basic exemption limit?No, but you must submit Form 15G or 15H to ensure the bank does not deduct TDS.
- Can I submit both Form 15G and Form 15H together?No, you can submit only one form based on your eligibility—Form 15G for individuals below 60 and Form 15H for senior citizens.
- What happens if I don’t submit Form 15G/15H in time?The bank will deduct TDS, and you’ll need to claim a refund while filing your ITR.
- How do I check if the bank has deducted TDS on my FD interest?You can check your Form 26AS or Annual Information Statement (AIS) on the Income Tax portal to verify TDS deductions made by the bank.
