TDS on Fixed Deposits
- TDS on FD interest is generally deducted at 10% when interest from a bank, co-operative bank, or post office crosses ₹50,000 in a financial year.
- For resident senior citizens, the threshold is ₹1,00,000.
- If PAN is not valid or not provided, TDS may be deducted at a higher rate, usually 20%, where applicable.
- From 1 April 2026, Form No. 121 replaces Forms 15G and 15H for eligible residents requesting non-deduction of TDS.
- Company/non-bank deposit TDS threshold is ₹10,000, updated from ₹5,000 from 1 April 2025 - do not assume the bank FD threshold applies.
- Post office FDs follow the same applicable threshold as bank FDs - they are not automatically TDS-free.
- FD interest must be reported in your ITR - TDS is advance tax, not your final tax liability.
This guide explains how TDS on fixed deposits works, when banks deduct it, how Form 121 applies from 1 April 2026, and how taxpayers can check or claim TDS credit correctly.
What is TDS on Fixed Deposit Interest?
TDS on fixed deposit interest is tax deducted by the bank, co-operative bank , post office or other payer before paying or crediting FD interest to the depositor. Credit to any suspense account or similar account is also treated as credit to the payee for TDS purposes.
For resident taxpayers, interest other than interest on securities is covered under the TDS framework that was earlier associated with Section 194A and is now reflected under the Income-tax Act, 2025, provisions from 1 April 2026.
For cumulative FDs, the bank may deduct TDS on accrued interest during the year, even if the depositor receives the final amount only at maturity. This is why taxpayers sometimes see TDS entries even before the FD matures. The deducted amount is deposited with the government against your PAN. You can later see it in Form 26AS, AIS and your income tax return, and claim it as tax credit while filing your return.
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Is FD Interest Taxable in India?
Yes. Fixed deposit interest is taxable income . It is usually reported under “Income from Other Sources” in the income tax return. This applies even if the bank does not deduct TDS because your interest is below the threshold.
For example, if you earn ₹35,000 as FD interest and no TDS is deducted, the interest is still taxable as per your slab rate. Similarly, if TDS is deducted at 10% but your slab rate is higher, you may need to pay the balance tax while filing your return.
Current TDS Rates and Exemption Limits
| Type of Depositor or Payment | TDS Rate with Valid PAN | TDS Threshold |
|---|---|---|
| Resident individual below 60 years, bank FD | 10% | ₹50,000 |
| Resident senior citizen, bank FD | 10% | ₹1,00,000 |
| Co-operative bank or post office time deposit interest | 10% | ₹50,000 general, ₹1,00,000 senior citizen |
| Company or non-bank deposit interest | 10% | ₹10,000 |
| NRO FD interest for NRIs | Rates in force (commonly 30% plus surcharge and cess, subject to DTAA or lower deduction certificate) | No resident threshold |
| NRE or FCNR deposit interest | Generally exempt if eligibility conditions are met | No TDS where exempt |
| Cases where valid PAN is not provided | Higher rate, usually 20% where applicable | Applies if TDS is otherwise deductible |
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How TDS is Calculated on FD Interest
TDS is calculated on the interest earned from the fixed deposit, not on the FD principal. Once the applicable threshold is crossed, TDS is deducted on the full interest amount, not only on the amount above the threshold.
Example 1: Resident Individual
| Particulars | Amount |
|---|---|
| Annual FD interest from one bank | ₹62,000 |
| Applicable threshold | ₹50,000 |
| TDS applicable? | Yes |
| TDS at 10% | ₹6,200 |
| Net interest credited after TDS | ₹55,800 |
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Here, TDS is deducted on the full ₹62,000, not only on the extra ₹12,000 above the threshold.
Example 2: FDs in Two Different Banks
| Bank | Annual FD Interest | TDS Position |
|---|---|---|
| Bank A | ₹42,000 | No TDS if below the applicable threshold |
| Bank B | ₹36,000 | No TDS if below the applicable threshold |
| Total FD Interest | ₹78,000 | Taxable in ITR |
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Splitting deposits across different banks may reduce TDS deduction if the interest from each bank remains below the threshold. However, it does not reduce income tax. The full ₹78,000 must still be reported in the income tax return .
Example 3: Company or Non-Bank Deposit
| Particulars | Amount |
|---|---|
| Interest from company deposit | ₹12,000 |
| Applicable threshold | ₹10,000 |
| TDS applicable? | Yes |
| TDS at 10% | ₹1,200 |
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For company or non-bank deposits, the TDS threshold may differ from regular bank FDs. Taxpayers should check the payer type before assuming the bank FD threshold applies.
Form 121 for Non-Deduction of TDS
From 1 April 2026, Form 121 is the consolidated declaration for eligible residents who want to request non-deduction of TDS . It replaces the earlier Forms 15G and 15H under the framework of the Income-tax Act, 2025.
The Income Tax Department maps earlier Forms 15G and 15H to Form No. 121 for declarations under section 393(6). The payer must also complete the required reporting and verification process linked to section 393(7).
Who can submit Form 121?
Form 121 can be used by eligible resident taxpayers whose estimated tax liability for the tax year is nil. However, the eligibility conditions are not identical for all taxpayer categories.
| Taxpayer Type | Main Condition |
|---|---|
| Resident individual below 60 years and other eligible resident persons | Tax on estimated total income should be nil, and aggregate specified income should not exceed the maximum amount not chargeable to tax |
| Resident senior citizen, 60 years or above | Tax on estimated total income should be nil |
| Company or firm | Not eligible |
| NRI | Not eligible |
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The form also requires a valid and operative PAN, payer details, income details, and other declaration information. It can be submitted in paper form or electronically where the payer provides that option.
Tax limits to check before submitting Form 121
Before submitting Form 121, taxpayers should check whether their estimated tax liability for the year is actually nil. This depends on their total income, tax regime, deductions, rebate eligibility, and the nature of income.
| Tax Regime or Taxpayer Category | Basic Exemption Limit |
|---|---|
| New tax regime | ₹4,00,000 |
| Old tax regime, below 60 years | ₹2,50,000 |
| Old tax regime, 60 to 79 years | ₹3,00,000 |
| Old tax regime, 80 years and above | ₹5,00,000 |
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These limits are a starting point, not the only test. A taxpayer should not submit Form 121 only because FD interest is below the TDS threshold. The declaration should be submitted only when the estimated tax liability for the year is nil, and the applicable Form 121 conditions are satisfied.
How to Avoid or Reduce TDS on FD Interest
Submit Form 121 early if you are eligible
If your estimated tax liability is nil, submit Form 121 to each bank or payer before the first interest credit or payment of the financial year. If TDS has already been deducted, the usual route is to claim it as a credit while filing your income tax return.
Keep your PAN valid and linked where required
If PAN is not provided or is not valid, TDS may be deducted at a higher rate. The Income-tax Act, 2025 also continues the principle that failure to furnish PAN can trigger a higher deduction.
Do not rely only on FD splitting
Keeping FDs across different banks may reduce TDS deduction if interest from each bank remains below the threshold. But this is only a cash-flow benefit . The full interest is still taxable.
Also, FDs in different branches of the same bank are not treated separately when the bank uses a core banking system. The threshold is applied at the bank level, not the branch level.
Apply for lower or nil deduction certificate where suitable
If TDS is likely to be higher than your actual tax liability, you may apply for a lower or nil deduction certificate through the prescribed process. Under the Income-tax Act, 2025, this is covered through the lower deduction certificate mechanism in Section 395.
TDS on Different Types of Fixed Deposits
Bank Fixed Deposits
Bank FDs follow the standard TDS rules shown above. The bank checks the total interest credited or paid during the financial year and deducts TDS if the applicable threshold is crossed. Recurring deposits are also treated like time deposits for TDS purposes, so taxpayers should track RD interest alongside FD interest when estimating their taxable interest income .
Senior Citizen Fixed Deposits
Senior citizens get a higher TDS threshold, but this does not make FD interest tax-free. The interest still needs to be reported on the income tax return.
Eligible senior citizens may also claim deduction under Section 80TTB on interest from deposits with banks, post offices, and co-operative banks, subject to the tax regime and other conditions. This can reduce taxable income, but it should not be confused with the TDS threshold.
Company and NBFC Fixed Deposits
Company and non-bank deposits may follow a different TDS threshold from regular bank FDs. Taxpayers should verify the payer's nature before assuming the bank FD threshold applies. This is especially important for investors who hold both bank FDs and company deposits, because the TDS treatment may differ even though both generate fixed interest income .
Post Office Fixed Deposits
Post office fixed deposits follow the applicable TDS threshold. They should not be treated as automatically TDS-free. Taxpayers should include post office FD interest while calculating total income for the year.
Tax-Saving Fixed Deposits
A 5-year tax-saving FD may help reduce taxable income through deduction on the principal investment, where eligible. However, the interest earned on the FD remains taxable. This means TDS can still apply on the interest even though the deposit itself qualifies for a tax-saving deduction.
NRI Fixed Deposits
NRI fixed deposit taxation depends on the type of account. NRO FD interest is taxable in India and is generally subject to TDS. NRE and FCNR interest is generally exempt if the required residential status and account conditions are satisfied. NRIs should also check whether DTAA benefit or a lower deduction certificate can reduce the TDS impact on taxable interest.
How to Claim TDS Refund on FD Interest
If TDS has been deducted but your actual tax liability is lower, you can claim the excess amount as a refund by filing your income tax return. The process is simple:
- Collect FD interest details from your bank.
- Check TDS in Form 26AS and AIS.
- Report total FD interest in your income tax return.
- Claim the TDS credit shown against your PAN.
- E-verify the return.
- If excess TDS was deducted, the refund will be processed by the Income Tax Department after return processing.
Example: If a retired person earns ₹70,000 FD interest and the bank deducts ₹7,000 as TDS, but the person’s final tax liability is nil, the ₹7,000 can be claimed as refund through the ITR.
How to Check TDS Deducted on FD
You can verify FD TDS through the following sources mentioned below. Also, if TDS is deducted by the bank but does not appear in Form 26AS or AIS, contact the bank and ask them to correct their TDS return.
| Source | What to Check |
|---|---|
| Form 26AS | TDS deducted and deposited by bank or payer |
| AIS | Interest income reported by banks and TDS details |
| Form 16A | TDS certificate issued by bank or payer |
| Bank interest certificate | Gross interest, TDS and net interest credited |
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For businesses, accountants, and firms managing multiple deposits, BUSY Accounting Software helps maintain bank-wise interest records, TDS entries, and year-end reports in one place.
Conclusion
TDS on fixed deposits is not the final tax on your interest income. It is only an advance tax deducted by the bank, post office, or other payer when the interest crosses the applicable limit. Your actual tax liability still depends on your total income, chosen tax regime, deductions, rebate eligibility, and slab rate .
For most resident taxpayers, TDS on FD interest applies when annual interest from a bank, co-operative bank, or post office crosses ₹50,000. For resident senior citizens, the limit is ₹1,00,000. For company or non-bank deposit interest, the threshold may be ₹10,000, depending on the nature of the payer. Even if no TDS is deducted, the interest earned on fixed deposits must still be reported in the income tax return.
If you are an eligible resident taxpayer and your estimated tax liability for the year is nil, you can submit Form 121 on time to avoid unnecessary TDS deduction. If TDS has already been deducted, you can claim it as a credit or refund while filing your ITR. The safest approach is to track FD interest every year, check Form 26AS or AIS before filing, and report the interest income correctly.
