TDS on FD Interest – How Much Tax Is Deducted on Fixed Deposits Interest

08^th Jul 2025...

Key Takeaways

TDS on fixed deposit interest is deducted when annual earnings exceed ₹40,000 for individuals and ₹50,000 for senior citizens.
The standard TDS rate is 10% if the PAN is linked to the account; otherwise, it increases to 20%.
Interest from FDs is fully taxable and added to total annual income under the individual’s tax slab.
TDS applies even to tax-saving FDs once the interest crosses the exemption threshold.
Form 15G (for those below 60) and Form 15H (for senior citizens) can prevent TDS if income is below taxable limits.
Investors with income under ₹2.5 lakh annually are exempt from TDS and may claim refunds if deducted.
TDS on FD interest is deducted at source by banks, usually at the end of each financial year.

One of the most well-liked investment alternatives in India is a fixed deposit, which enables people to create a steady income stream without having to risk their money on inconsistent markets. However, investors must also be aware of tax on FD interest, as it falls under the jurisdiction of the Income Tax Act of India of 1961. The tax rate is set according to the applicable tax slab for each individual.

Understanding TDS on a Fixed Deposit

TDS, short for Tax Deducted at Source, on a fixed deposit is a type of tax deducted from the interest that is accumulated on a fixed deposit account at the source. TDS on interest on fixed deposit applies if the interest earnings exceed a certain threshold and fall within the taxable category. The interest on FD accounts is taxable regardless of where the account was started by the individual.

It is crucial to remember that income from tax-saving investments is likewise liable to TDS. When two people have joint FD accounts, TDS is withheld from the fixed deposit fee and charges based on the PAN of the principal account holder. It indicates that TDS on FD deductions are not the secondary account holder's responsibility.

For example, if the interest earned on a fixed deposit surpasses a certain threshold, TDS on FD interest is imposed. Such a tax is ideally withheld according to the guidelines and TDS rates on FD established by the Indian Income Tax Department.

When Is a Fixed Deposit TDS Debited by the Bank?

When your fixed deposit interest on deposits exceeds Rs.40,000 for non-senior citizens and Rs.50,000 for senior citizens in a given financial year, Kotak 811 begins deducting TDS on interest on fixed deposit from your earnings.

Additionally, TDS is subtracted from unpaid interest accumulated by March 31st, the end of the fiscal year.

For instance: If the total interest earned in a financial year is Rs.5,000/- (including interest on fixed and recurring deposits), TDS will not be deducted because the threshold has not been crossed.

As it surpassed the barrier for individuals at a rate of 10%, the total interest earned (including fixed and recurring deposits) in a financial year will be Rs.45,000/- and TDS will be deducted.

Exemption Limit for FD TDS Deduction

Effective financial planning requires knowledge of TDS exemption limits on fixed deposits. The exemption limitations are different for each depositor depending on their age and taxable income under the current Income Tax regulations.

For individuals, the maximum exemption from TDS on FDs is Rs.40,000/- except for senior citizens. It means that if an FD earns less than Rs.40,000/- in interest over a financial year, no TDS would be withheld. Senior citizens, on the other hand, are granted a larger exemption limit of Rs.50,000/- in recognition of their financial situation.

TDS is fully waived for those whose total taxable income is less than Rs.2,50,000/- on their FDs. Lower-income people benefit from this exemption, guaranteeing they won't have to deal with tax on FD interest or unnecessary deductions.

The most recent Income Tax regulations should be followed closely, as these exemption levels are liable to alter. You must make educated decisions and maintain compliance with the latest TDS rates on FD legislation in India by receiving regular updates from government sources and financial organizations.

Also Read: Old Vs New Income Tax Regime 2024-25

Understanding Forms 15G and 15H

Self-declaration forms 15G and 15H are used to avoid having certain incomes subject to TDS.

1. Form 15H is for senior citizens (over 60 years of age), whereas Form 15G is for people under 60.

2. These forms can be used to state that no tax is due if the total income is less than the taxable limit.

3. Individuals can ensure they receive the entire amount without any tax deduction by filing these fixed deposit documents required and saving TDS on interest income from Fixed Deposits (FDs), Recurring Deposits (RDs), and other sources.

4. Forms 15G or 15H can be submitted to your bank to prevent a TDS deduction on your foreign direct investment stake in India.

5. By using these forms as a self-declaration, you can advise the bank that your income is below the basic exemption limit and hence TDS should not be paid on your FD interest.

Use Form 15G if you are under 60 years old, and Form 15H if you are 60 years of age or over. If your income stays below the exemption limit, you can collect your entire FD interest without any tax on FD interest by giving your bank this paperwork to guarantee that TDS is not withheld.

How to get TDS Waiver on FD

Under the appropriate provisions of the Income Tax Act, holders of fixed deposits may be able to claim a TDS deduction. For example, holders of fixed deposit accounts may request a remission of TDS on their earnings by submitting Forms 15G or 15H for declaration. Then turn them into their FD provider at the start of each fiscal year.

It is important to remember that these documents act as a self-declaration certifying that there is no tax on the overall income for a certain fiscal year. Therefore, since the total taxable income on FD is zero, no TDS on interest on fixed deposit should be subtracted from the interest earned.

In addition, people who make less money overall than the minimum tax slab may be eligible for a TDS refund on the taxes they have already paid. Refunds can only be requested during the income tax return filing process.

Conclusion

Fixed deposits (FDs) have long been the go-to choice for dependable investments. You may rely on FDs to provide you with a consistent stream of interest income if you prefer low-risk investments.

The interest you receive on FDs is taxed, just like most investments, so it's vital to be aware of that. Taxes on FD interest received from FDs are guaranteed to be paid thanks to the TDS on interest on fixed deposit system.

FAQ

1. What is the TDS rate on FD interest?
The standard TDS rate on FD interest is 10% if your PAN is updated with the bank. If not, a higher rate of 20% may be applied.

2. How can I avoid TDS on interest from fixed deposits?
You can submit Form 15G (for individuals below 60) or Form 15H (for senior citizens) if your total income is below the taxable limit.

3. Is FD interest fully taxable?
Yes. FD interest is added to your annual income and taxed as per your slab, although TDS on interest on fixed deposit is deducted in advance.

4. Can I get a refund for TDS deducted on FD interest?
Yes. If your actual tax liability is less than what was deducted, you can claim a refund by filing your income tax return.

5. Are tax-saving FDs also subject to TDS?
Yes, even tax-saving FDs are subject to TDS on FD interest if the interest earned exceeds the applicable exemption threshold.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.