TDS on Fixed Deposit (FD) Interest: Rates, Limits & Exemptions 2025

Interest on Fixed Deposits is one of the most common passive income for many taxpayers in India. FD interest is subject to TDS under section 194A of the Income Tax Act. TDS is levied at 10% of interest income when interest income exceeds Rs.50,000 per annum. This article explains in detail the applicability of TDS on FD interest, exemption limits, TDS rates, and ways to avoid TDS implications, along with illustrations.

TDS Rates on Fixed Deposit

• TDS is levied on interest earned from fixed deposits under section 194A of the Income Tax Act.
• TDS of 10% on FD interest will be deducted.
• If the account holder does not provide the PAN to the bank, a 20% TDS will be deducted.

What is the Exemption Limit for TDS Deduction on an FD?

• From financial year 2025-26, TDS will not be deducted from FD interest as long as it does not exceed Rs.50,000 for the whole year.
• The calculation of the Rs. 50,000 limit differs depending on whether the banks have adopted core banking systems are not.
• Most nationalized and private banks are likely to adopt core banking systems, whereas co-operative banks and other small banks may still lack one.
• The calculation of the TDS threshold limit in both cases is presented below.

Illustration

Case -1:

Consider Bank A, which has adopted the Core Banking System in its operations. Mr. X has FDS in 3 branches of Bank A. The interest from each branch is as follows.

• Branch A: Rs 3,00,000 FD → Rs 31,000 interest
• Branch B: Rs 4,00,000 FD → Rs 18,000 interest
• Branch C: Rs 5,00,000 FD → Rs 33,000 interest

Solution

Since the bank has CBS and the total interest for all branches - Rs 82,000 - exceeds the Rs 50,000 TDS limit, TDS is deducted for FD interest from Bank A.

Case-2:

Consider Bank B, which has not adopted the Core Banking System in its operations. Mr. X has FDS in 3 branches of Bank B, and he has earned the same amount of FD interest from 3 different branches as described in the above illustration.

Solution

Without CBS, the limit is calculated per branch. As interest in each is under Rs 50,000, no TDS is deducted, even though the total interest is Rs 82,000.

A pictorial representation of the above illustration is presented below.

TDS on FD Interest for Senior Citizens

• The act has relaxed the TDS exemption limit for senior citizens.
• TDS will not be deducted from the FD interest of senior citizens as long as it does not exceed Rs.1 lakh during the financial year.

Avoiding TDS On Fixed Deposits - Form 15G and Form 15H

• If your total income is below the taxable limit, you can avoid tax deductions on fixed deposits by submitting Form 15G and Form 15H to the bank, requesting them not to deduct any TDS. 
• Form 15H is for senior citizens (60 years or older); Form 15G is for everybody else.
• These forms are for residents only and must be submitted at the start of the financial year. 
• If you missed submitting them, then you can claim the TDS deducted as a refund by filing an income tax return. 
• These forms are valid for one year only. Therefore, they must be submitted yearly to keep banks from deducting tax.

Reporting Fixed Deposit in Your Tax Return

•  The details of FD interest earned and TDS deducted on the same are in Form 26AS, Annual Information Statement (AIS) and Taxpayer Information Statement (TIS).
• If you have more than one FD open, add all the interest income and enter it under ‘Income from Other Sources’.