What Is TDS on FD? How Banks Deduct Tax on Fixed Deposits
Your bank quietly deducts TDS on FD interest — here is what that means and how to avoid unnecessary deductions.
Fixed deposits are one of India's most popular savings instruments, offering guaranteed returns with zero market risk. But many depositors are surprised to discover that the interest they earn is not entirely theirs — the bank deducts Tax Deducted at Source (TDS) before crediting the interest. Understanding TDS on FD helps you plan better, submit the right forms, and avoid a nasty tax surprise at filing time.
What Is TDS?
TDS is a mechanism under the Income Tax Act where the payer deducts tax at source and remits it directly to the government on your behalf. For fixed deposits, your bank (SBI, HDFC, ICICI, or any other) acts as the deductor. The TDS is deposited against your PAN and appears in your Form 26AS and Annual Information Statement (AIS).
TDS Threshold on FD Interest (FY 2025-26)
TDS on FD interest is governed by Section 194A of the Income Tax Act:
| Depositor Type | TDS Threshold (per bank, per FY) | TDS Rate |
|---|---|---|
| Regular individuals | ₹40,000 | 10% |
| Senior citizens (60+ years) | ₹50,000 | 10% |
| If PAN not provided | ₹40,000 / ₹50,000 | 20% |
The threshold is per bank, not per FD. So if you have three FDs at the same bank earning ₹15,000 each (total ₹45,000), TDS applies. But if you split them across two banks — ₹35,000 at Bank A and ₹10,000 at Bank B — neither crosses the threshold.
How TDS Is Calculated
TDS is deducted on accrued interest, not just on interest actually paid out to you. Banks calculate accrued interest at the end of each financial year (31 March) even if your FD has not matured.
FD amount : ₹5,00,000
Interest rate: 7% per annum
Annual interest accrued: ₹35,000
Since ₹35,000 < ₹40,000 threshold → No TDS deducted
FD amount : ₹8,00,000
Annual interest accrued: ₹56,000
TDS @ 10% = ₹5,600 deducted by bank
Net interest credited: ₹50,400
Use our FD calculator to estimate your annual interest and check whether you will cross the TDS threshold.
Submitting Form 15G or 15H
If your total income is below the basic exemption limit, you can submit a self-declaration to avoid TDS altogether:
- Form 15G — for individuals below 60 years. Two conditions must both be met: (1) estimated total income for the year is below the exemption limit, and (2) tax on estimated total income is nil.
- Form 15H — for senior citizens (60+ years). Only one condition: tax on estimated total income is nil. No income cap.
Submit these forms at the beginning of each financial year (April). You can now submit digitally through your bank's net banking portal. Submit to each bank separately.
Important: Submitting Form 15G/15H when you are not eligible is a punishable offence under Section 277 of the Income Tax Act.
TDS Does Not Mean Your Final Tax Is Paid
TDS is only an advance payment of tax, not the final settlement. Your actual liability depends on your total income and applicable slab. If TDS exceeds your liability, you get a refund when you file your ITR. If TDS is less than your liability, you must pay the balance as self-assessment tax before filing.
Example: Priya earns ₹6 lakh salary + ₹60,000 FD interest. The bank deducts ₹6,000 TDS. Her total tax liability (under new regime) on ₹6.6 lakh income may be different. She reconciles in ITR-1 and either pays more or claims a refund.
Claiming TDS Credit
TDS deducted by your bank is credited to your PAN and visible in Form 26AS. When filing your ITR:
- Include FD interest under "Income from Other Sources".
- Claim TDS credit in the tax payment section — it auto-populates from Form 26AS in most tax portals.
- The system computes net tax payable or refund due.
Never skip reporting FD interest just because TDS was deducted — the income must still be declared.
What If TDS Was Wrongly Deducted?
If the bank deducts TDS despite your Form 15G/15H submission, raise a complaint with the bank. If unresolved, you can still claim a full refund by reporting the interest and the TDS credit in your ITR. The refund is processed by the Income Tax Department after assessment.
Conclusion
TDS on FD is not an additional tax — it is an advance collection of the tax you already owe on interest income. Stay ahead by submitting Form 15G or 15H if eligible, track your TDS in Form 26AS, and always declare FD interest in your ITR regardless of whether TDS was deducted. A small amount of planning each April can prevent unnecessary deductions and simplify your filing in July.
These figures are estimates for educational purposes. Consult a SEBI-registered advisor for personalised advice.
Frequently asked questions
What is the TDS limit on fixed deposit interest for senior citizens?+
Senior citizens (aged 60 and above) enjoy a higher TDS threshold of ₹50,000 per bank per financial year under Section 194A. TDS is deducted at 10% only on interest exceeding this amount.
Can I avoid TDS on my FD even if my interest exceeds ₹40,000?+
Yes, if your total estimated income for the year is below the basic exemption limit and your tax liability is nil, you can submit Form 15G (or Form 15H for seniors) to your bank at the start of the financial year to prevent TDS deduction.
Does splitting an FD across multiple banks help avoid TDS?+
Yes. The TDS threshold applies per bank, not in aggregate. If your interest at each individual bank stays below ₹40,000 (₹50,000 for seniors), no TDS is deducted. However, the total interest is still taxable and must be reported in your ITR.
What happens if I do not provide my PAN to the bank?+
If you have not linked your PAN to your FD, the bank must deduct TDS at 20% instead of 10%, regardless of the interest amount.
Will TDS be deducted if my FD has not matured yet?+
Yes. Banks deduct TDS on accrued interest at the end of each financial year (31 March), even if the FD has not matured. The interest is treated as income in the year it accrues.
Try the calculators
Keep reading
- Tax on FD Interest in India: What You Actually Owe
Fixed deposit interest feels safe — but every rupee of it is taxable income at your slab rate.
- What Is Form 26AS? Your Complete Tax Credit Statement Explained
Form 26AS is the one document that knows everything the government knows about your income — always reconcile before you file.
- Advance Tax in India: Who Pays It, When, and How to Calculate It
If your tax liability exceeds ₹10,000 in a year, the government expects you to pay in advance — missing the deadlines costs you interest.
Maya has spent the last decade turning confusing money topics into plain English. She’s happiest when a reader tells her a guide finally made compound interest click.