By Pramod Kumar · B.Tech NIT Nagpur | M.Tech IIT Roorkee | Founder, BookmyFD · July 14, 2026 | 8 min read
Every time your bank pays you interest on a Fixed Deposit, it may deduct a small percentage as TDS (Tax Deducted at Source) before crediting the rest to your account. Many depositors are surprised to see a lower amount than expected — this guide explains exactly why, how much is deducted, and how you can reduce or reclaim it.
The good news for 2026: following Budget 2025, the tax-free threshold for FD interest has gone up significantly, which means far fewer depositors will see TDS deducted at all.
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📑 Table of Contents
1. What Is TDS on FD Interest?
TDS on FD interest is governed by Section 194A of the Income Tax Act. Whenever a bank, post office, or NBFC pays or credits interest on your Fixed Deposit above a specified threshold, it must deduct tax at source before paying you, and deposit that amount with the Income Tax Department on your behalf.
Importantly, TDS is not an extra tax — it is an advance collection of tax that is adjusted against your final tax liability when you file your Income Tax Return (ITR). If your total income is below the taxable limit, or if too much TDS was deducted, you can claim it back as a refund.
2. New TDS Threshold Limits 2026
Budget 2025 raised the TDS-free threshold on FD interest, effective 1 April 2025, giving depositors meaningfully more room before any tax is withheld.
| Depositor Type | Payer | TDS-free Threshold (per payer, per year) |
|---|---|---|
| General investor (below 60) | Bank / Co-op Bank / Post Office | ₹50,000 (up from ₹40,000) |
| Senior citizen (60+) | Bank / Co-op Bank / Post Office | ₹1,00,000 (up from ₹50,000) |
| Any investor | NBFC (e.g. Bajaj Finance, Shriram Finance) | ₹10,000 (up from ₹5,000) |
* Thresholds effective from FY 2025-26 (1 April 2025) onward, and continue to apply in FY 2026-27.
3. How TDS Is Calculated — Example
TDS is deducted at a flat 10% once your interest from a single bank crosses the threshold in a financial year — and it applies to the entire interest amount, not just the portion above the threshold.
Since ₹62,000 > ₹50,000 threshold, TDS applies on the full ₹62,000 — not just the ₹12,000 above the limit.
TDS deducted = 10% of ₹62,000 = ₹6,200. You receive ₹55,800 net; the balance is adjusted when you file your ITR.
Since ₹85,000 is below the ₹1,00,000 threshold for senior citizens, no TDS is deducted — the full amount is credited.
4. Form 15G vs Form 15H — Avoid TDS
Even if your interest crosses the threshold, you can prevent TDS deduction upfront if your total taxable income (after eligible deductions) is below the basic exemption limit. You do this by submitting a self-declaration form to your bank.
| Form | Who Can Use It | Condition |
|---|---|---|
| Form 15G | Individuals below 60 years, HUFs | Total taxable income below the basic exemption limit and tax payable is nil |
| Form 15H | Senior citizens (60 years and above) | Tax payable on total income is nil (no income ceiling condition, unlike 15G) |
Steps to Submit Form 15G / 15H
Check eligibility
Confirm your total tax liability for the year is nil after all deductions and exemptions.
Download the form
Available on your bank's NetBanking portal, mobile app, or the Income Tax Department website (incometax.gov.in).
Submit at the start of the financial year
Ideally in April, before the bank credits any interest, so TDS is never deducted in the first place.
Submit separately to each bank
Form 15G/15H must be filed at every bank branch or NBFC where you hold an FD — it is not automatically shared across institutions.
5. No PAN? You Pay Double TDS
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If your FD account is not linked to a valid PAN, banks are required to deduct TDS at 20% instead of 10% — regardless of your income level or Form 15G/15H eligibility. This rule exists to discourage undisclosed income.
6. How to Claim a TDS Refund
If TDS was deducted but your total income (including FD interest) is below the taxable limit, or your actual tax liability is lower than the TDS deducted, you can claim the excess back.
Collect your Form 16A / AIS
Download Form 16A (TDS certificate) from your bank, or check the Annual Information Statement (AIS) on the income tax e-filing portal for all TDS entries.
Add FD interest as "Income from Other Sources"
Report the full interest amount (not just the net amount received) while filing your ITR.
Claim TDS already deducted
The TDS amount shown in your Form 26AS/AIS is automatically available to adjust against your total tax due.
File your ITR before the due date
Any excess TDS is refunded directly to your bank account, typically within a few weeks of e-verification.
7. Section 80TTA vs 80TTB Deduction
Separate from the TDS threshold, the Income Tax Act also allows a deduction on interest income when computing your taxable income — helpful even if TDS was already deducted.
| Section | Applicable To | Covers | Max Deduction |
|---|---|---|---|
| 80TTA | Individuals below 60 years | Savings account interest only (not FD interest) | ₹10,000/year |
| 80TTB | Senior citizens (60+) | Interest from FD, RD, and savings accounts | ₹50,000/year |
8. Smart Tips to Reduce Your TDS Burden
Split FDs across banks
Keep interest from each bank under the ₹50,000/₹1 lakh threshold to reduce upfront TDS deduction.
Submit 15G/15H every April
File it at the very start of the financial year with every bank, before the first interest credit.
Link PAN everywhere
Ensure PAN is updated on every FD account to avoid the punishing 20% TDS rate.
Time your FD maturity
If close to year-end, consider whether booking or renewing just after 1 April keeps interest within a lower-tax financial year.
Track via AIS
Check the Annual Information Statement periodically so no TDS entry is missed at ITR filing time.
Route via a senior citizen family member
Within your family's overall financial planning, senior citizens get a much higher tax-free threshold — plan jointly where appropriate.
9. Frequently Asked Questions
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Compare FD Rates →Disclaimer: This article is for informational purposes only and does not constitute tax or investment advice. TDS thresholds and rates are as of July 2026 and subject to change by the Income Tax Department. Please consult a qualified Chartered Accountant or tax adviser for guidance specific to your situation. BookmyFD is a comparison platform and does not offer tax or financial advice.