Bank FD News : In today’s financial landscape, a wide variety of investment options are available that offer attractive returns along with security. Despite this, a large number of investors, particularly in India, still prefer to invest in Fixed Deposits (FDs) due to their safety and assured returns. However, what many people, especially young women and new investors, are unaware of is that the interest earned on Fixed Deposits is taxable. But there are certain conditions under which no tax is deducted at source (TDS) on FD interest.
If you’re also unsure about the tax implications on your FD interest, don’t worry. This article will guide you through all the important details, including what TDS is, how it’s calculated, and under what circumstances you can avoid paying tax on your FD interest.
Bank FD News : What is TDS?
TDS stands for Tax Deducted at Source. It is a method introduced by the Indian government for collecting tax directly from the source of income. Whenever you receive certain types of income such as salary, interest, rent, commission, or professional fees, a portion of it is deducted as TDS before the payment is made to you. This deducted amount is then deposited with the Income Tax Department by the entity making the payment, such as your bank or employer.
The purpose of TDS is to ensure that tax is collected in a timely and efficient manner, reducing the chances of tax evasion. The amount of TDS deducted depends on the nature of the income and the applicable tax rates.
Bank FD News : Fixed Deposit Interest is Taxable
When you invest in a Fixed Deposit with a bank or a financial institution, you earn interest on that amount over a specified period. While this interest is assured and risk-free, it is fully taxable under the head of “Income from Other Sources” in your Income Tax Return (ITR). This means that the interest income is added to your total income and taxed as per the applicable income tax slab.
In addition to this, the bank itself deducts TDS on the interest earned if it exceeds a certain threshold, and deposits it with the government on your behalf.
Bank FD News : How is TDS on Fixed Deposit Calculated?
TDS on FD interest is calculated based on the total interest amount you earn in a financial year (April to March), not on the amount of principal you invest. The TDS rate is generally 10%, provided you have furnished your PAN (Permanent Account Number) with the bank. If you fail to submit your PAN, the bank will deduct TDS at a higher rate of 20%.
Let’s understand this with an example:
-
If you earn ₹50,000 in interest from FDs in a financial year and have submitted your PAN, the bank will deduct ₹5,000 (10%) as TDS.
-
However, if PAN is not submitted, the TDS will be ₹10,000 (20%).
This deducted amount is then reflected in your Form 26AS and can be claimed while filing your ITR.
When Is TDS Not Applicable on Fixed Deposit Interest?
There are certain conditions under which TDS is not deducted on FD interest, even if you earn interest from your investment:
1. Interest Earned is Less Than ₹40,000 (₹50,000 for Senior Citizens)
As per the current Income Tax provisions:
-
If your total interest income from FDs in a financial year is less than ₹40,000, the bank will not deduct any TDS.
-
For senior citizens (individuals aged 60 years or above), this limit is ₹50,000 per financial year.
This threshold is applicable across all FDs in a single bank. So, if you have FDs in multiple banks, you need to calculate the total interest from each bank separately for this limit.
2. Total Taxable Income is Below the Basic Exemption Limit
Even if your interest income exceeds ₹40,000 (or ₹50,000 for senior citizens), you can avoid TDS if your total income is below the taxable limit. The basic exemption limits (as of current tax slabs) are:
-
₹2.5 lakh for individuals below 60 years
-
₹3 lakh for individuals between 60–80 years
-
₹5 lakh for individuals above 80 years
In such cases, you can submit Form 15G (for individuals below 60 years) or Form 15H (for senior citizens) to the bank, declaring that your total income is below the taxable limit and requesting no TDS deduction.
What if TDS is Already Deducted?
If the bank has already deducted TDS from your FD interest, and your total taxable income is below the exemption limit, you can claim a refund while filing your Income Tax Return.
For example, if your only income is from FD interest, say ₹45,000, and your total income is below ₹2.5 lakh (basic exemption limit), you are not liable to pay tax. But if the bank has deducted 10% TDS, you can claim the entire amount as a refund in your ITR.
Make sure to keep track of all your FD interest income and TDS deducted using:
-
Form 16A (TDS certificate from the bank)
-
Form 26AS or Annual Information Statement (AIS) on the income tax portal
Important Points to Remember
-
Always submit your PAN to the bank where you open an FD. If not, TDS will be deducted at 20% instead of 10%.
-
TDS is deducted only on interest, not on the principal.
-
Interest is taxable even if TDS is not deducted. You must declare it in your ITR.
-
If you fall in a higher tax bracket (e.g., 20% or 30%), you will have to pay additional tax on FD interest over and above TDS.
-
Submitting Form 15G/15H is a proactive way to avoid unnecessary TDS if you are not liable to pay tax.
Conclusion
While Fixed Deposits remain one of the safest investment options for Indian investors, especially risk-averse individuals and senior citizens, it is essential to understand the tax implications on the interest earned. TDS on FD interest is a reality that cannot be ignored, but under the right circumstances—such as having income below the exemption limit or earning less than ₹40,000/₹50,000 interest annually—you can legally avoid paying TDS.
Being informed about these rules helps you plan better, maximize your returns, and avoid unnecessary deductions or legal complications. So, make sure to keep proper records, check your interest earnings regularly, and file your tax returns accurately to stay compliant and benefit from eligible refunds or exemptions.