If you hold fixed deposits, your bank may deduct TDS (Tax Deducted at Source) on the interest and pass it to the government on your behalf under Section 194A of the Income Tax Act. Budget 2025 raised the limits at which this kicks in, so from FY 2025-26 fewer small depositors face deduction. Here's exactly how it works now.
The New TDS Limits (FY 2025-26)
TDS on bank FD/RD interest applies only once your interest in a single bank crosses the threshold for the year. Below it, the bank deducts nothing.
Section 194A — Threshold Comparison
| Depositor | Old limit (till FY 24-25) | New limit (FY 25-26) |
|---|---|---|
| Below 60 years | ₹40,000 | ₹50,000 |
| Senior citizen (60+) | ₹50,000 | ₹1,00,000 |
Rate: 10% with PAN · 20% if PAN is not furnished or is inoperative. The limit is per bank, across all your branches and FDs in that bank.
How the TDS Is Calculated
The bank deducts 10% on the entire interest for the year — not just the part above the threshold — once you cross the limit. The principal is never touched.
No TDS — below limit
TDS applies — above limit
Important: TDS is not your final tax
Even if no TDS is deducted (interest below the limit), FD interest is still fully taxable as "Income from Other Sources" and must be declared in your ITR. TDS is just an advance collection — your actual tax depends on your slab.
How to Avoid TDS on FD Interest — Form 15G / 15H
If your total income for the year is below the taxable limit, you should not have to suffer TDS at all. You can stop it by filing a simple self-declaration with your bank:
- Form 15G — for individuals below 60 whose total income is below the basic exemption limit and whose final tax is nil.
- Form 15H — for senior citizens (60+) whose estimated tax for the year is nil.
- Submit it at the start of every financial year (April), to each bank, through net banking or the branch. It is not auto-renewed.
- Don't file a false declaration — if your income is actually taxable, penalties apply.
How to Claim Back TDS Already Deducted
If TDS was deducted but your real tax liability is lower (or nil), you get the excess back as a refund when you file your return:
- Check the deducted TDS in your Form 26AS and AIS on the income tax portal — it should match your bank's interest certificate.
- Report the full interest income and the TDS in your ITR.
- The portal computes whether tax is payable or a refund is due; the refund is credited to your pre-validated bank account, usually within a few weeks of e-verification.
Calculate your TDS in seconds
Enter your interest and PAN status — see exactly how much TDS applies under Section 194A.
Open TDS Calculator →Common Mistakes to Avoid
- Assuming below-limit interest is tax-free — it's not; report it anyway.
- Inoperative or unlinked PAN — triggers 20% TDS instead of 10%. Keep PAN linked to Aadhaar.
- Splitting FDs across branches of the same bank — doesn't help; the limit is per bank (PAN-level), not per branch.
- Forgetting to re-submit 15G/15H every April — banks act on the latest declaration only.