Money Clarity

TDS on FD interest: the limits, and the tax TDS does not cover

The most expensive belief about fixed deposits is that no TDS means no tax. Since April 2025 a bank deducts TDS on FD interest only when it crosses ₹50,000 in a year, or ₹1 lakh for senior citizens, so many depositors now see no deduction at all. Every rupee of that interest is still taxable at their slab rate.

The opposite mistake costs money too. A depositor whose income is below the taxable limit can have TDS deducted that they never owed, and either reclaim it at filing or stop it in advance.

This page shows how TDS on FDs works now, what it means at different slabs, and how to avoid both mistakes.

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Last reviewed 2026-11-01

The TDS limits on FD interest now

The 2025-26 Budget raised the thresholds above which banks, co-operative banks and post offices deduct TDS on interest. For senior citizens the limit doubled from ₹50,000 to ₹1 lakh a year; for everyone else it rose from ₹40,000 to ₹50,000. Above the limit, TDS is deducted at 10% if the bank has your PAN.

The limit is per bank, for the year's interest across your deposits with that bank. Interest from two banks is counted separately for TDS, but added together for tax.

Depositor	TDS starts above, per bank, per year	TDS rate with PAN
Below 60	₹50,000	10%
Senior citizen	₹1,00,000	10%

Source: Union Budget 2025-26 speech, TDS annexure. Without a PAN, TDS is deducted at a higher rate.

Splitting deposits across banks can keep each below the TDS limit, but it does not reduce the tax. It only moves when you pay it

No TDS does not mean no tax

The technique

Tax follows the interest, not the deduction

TDS is a collection method. FD interest is income taxed at your slab rate whether or not anything was deducted. Below the threshold, the whole tax is yours to pay when you file.

Take Ramesh, 45, with ₹6 lakh in one bank at an illustrative 7.5%. His interest is ₹45,000, under the ₹50,000 limit, so the bank deducts nothing. At a 30% slab he owes ₹13,500 of tax on it, plus cess, all of it at filing.

If he had ₹7 lakh instead, his ₹52,500 of interest crosses the limit and the bank deducts ₹5,250. He still owes ₹10,500 more at a 30% slab. In both cases the tax is the same share of his interest; only the timing differs.

Ramesh at a 30% slab, illustrative 7.5% FD

₹6 lakh FD: interest: ₹45,000
TDS deducted (below ₹50,000): ₹0
Tax owed at filing, before cess: ₹13,500
₹7 lakh FD: interest: ₹52,500
TDS deducted at 10%: ₹5,250
Still owed at filing, before cess: ₹10,500

Illustrative rate. Add 4% cess to the tax figures.

If your FD interest is large, pay advance tax during the year rather than all of it at filing, to avoid interest on the shortfall

Senior citizens: the higher limit and what it means

For senior citizens the ₹1 lakh limit means a bank deducts nothing on, for example, ₹13 lakh at an illustrative 7.5%, which earns ₹97,500. Whether tax is due depends on total income. A retired depositor whose total income, FD interest included, is below the taxable limit owes nothing; one with a pension in a higher slab owes tax on all ₹97,500.

So the higher limit removes deductions for many seniors who owed no tax, which is its purpose, and leaves the filing obligation with those who do.

If you are a senior citizen with FDs across several banks, add up the interest from all of them before deciding whether you owe tax; each bank only sees its own

Stopping TDS you do not owe

If your total income, including the interest, is below the taxable limit, you can give each bank a self-declaration at the start of the year so it does not deduct TDS. These have long been Form 15G, and Form 15H for senior citizens; your bank will tell you the current form name. A declaration is not a way to avoid tax you owe: making one when your income is taxable is a false declaration.

If TDS was deducted anyway, it is not lost. It appears in your Form 26AS and Annual Information Statement, and you claim it back as a refund when you file.

Submit the declaration in April, before the first interest is credited, and to every bank where you hold deposits
Check Form 26AS once a year to match every bank's TDS against your own records

Before you file: FD interest checklist

Most FD tax problems come from interest nobody added up.

Add up FD interest from every bank for the year, including interest that was reinvested and never reached your savings account
Report it as income from other sources at your slab, whether or not TDS was deducted
Match TDS against Form 26AS, then pay any balance before filing
For cumulative FDs, interest is taxable each year as it accrues, not only at maturity

Common questions

What is the TDS limit on FD interest?

From the 2025-26 Budget, banks, co-operative banks and post offices deduct TDS only when FD interest with that bank crosses ₹50,000 a year, or ₹1 lakh for senior citizens. Above that, TDS is 10% with a PAN.

If no TDS is deducted, is FD interest tax-free?

No. All FD interest is taxable at your slab rate. TDS is only a collection method. Below the threshold you pay the whole tax yourself when you file; at a 30% slab, ₹45,000 of interest with no TDS still owes ₹13,500 plus cess.

How do I avoid TDS on FD interest?

If your total income including the interest is below the taxable limit, give each bank a self-declaration at the start of the year (long known as Form 15G, or 15H for senior citizens). If TDS was deducted when you owed no tax, claim it back as a refund when you file.

Is TDS on FD calculated per bank?

Yes. Each bank applies the threshold to the interest it pays you. For tax, interest from all banks is added together, which is why splitting deposits changes TDS but not the tax.

Banks deduct TDS on FD interest only above ₹50,000 a year, or ₹1 lakh for senior citizens, at 10% with a PAN. The tax is your slab rate on all of it: Ramesh's ₹45,000 of interest had no TDS and still owed ₹13,500 at a 30% slab. Add up interest across every bank, pay the balance over TDS, and use the self-declaration only if your income is below the taxable limit.

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