FD Interest Tax & TDS India 2025 — Fixed Deposit Tax Rules, 15G/15H, and ITR

Fixed deposits are one of India's most popular savings instruments — but FD interest is often misunderstood from a tax perspective. Many people assume TDS = tax paid, and don't report FD interest in ITR. That's incorrect. Here's the complete picture.

FD Interest Tax — The Core Rule

FD interest income is classified as "Income from Other Sources" under the Income Tax Act. It's fully taxable — added to your total income and taxed at your applicable slab rate. There are NO exemptions or deductions specifically for FD interest (unlike savings account interest which has ₹10,000/₹50,000 exemption under Section 80TTA/80TTB).

TDS on FD Interest — When It's Deducted

Category	Annual FD Interest Threshold	TDS Rate
General taxpayers (below 60)	Above ₹40,000	10%
Senior citizens (60+ years)	Above ₹50,000	10%
Without PAN	Any amount	20%

The ₹40,000 threshold applies per bank — if you have FDs in multiple banks, each bank independently checks if interest exceeds ₹40,000. However, you must still report all FD interest in your ITR regardless of whether TDS was deducted.

TDS vs Actual Tax — An Important Distinction

TDS is not the final tax. It's just an advance deduction. If your actual tax liability on FD interest (at your slab rate) is higher than TDS deducted, you must pay the remaining tax. If TDS is more than your actual liability, you get a refund. Both scenarios require filing ITR.

Example: If your total income puts you in the 30% slab, the bank deducted only 10% TDS — you still owe 20% more as additional tax on FD income. Not filing ITR means you're liable for interest and penalties.

How to Avoid TDS — Form 15G and 15H

Form 15G — For Those Below 60

Submit Form 15G to your bank to declare that your total income for the year will be below the taxable threshold (₹2.5L or ₹3L under new regime). Conditions:

• Must be below 60 years of age
• Total income for the year must not exceed basic exemption limit
• Estimated FD interest must not exceed basic exemption limit

Form 15H — For Senior Citizens (60+)

Senior citizens submit Form 15H — similar declaration that income won't be taxable. Relaxed condition: no requirement that estimated interest be below exemption limit — just that final tax liability is nil.

Submit Forms 15G/15H at the beginning of each financial year (April). Banks require fresh submission annually.

5-Year Tax-Saving FD — What's Exempt, What's Not

• Principal invested: deductible under Section 80C (up to ₹1.5 lakh per year)
• Interest earned: fully taxable — no exemption on interest from tax-saving FD
• Lock-in period: 5 years — premature withdrawal not allowed

Compare with ELSS (mutual fund 80C) — ELSS LTCG (above ₹1.25L) taxed at 12.5%, while FD interest is taxed at your slab rate. For high-income individuals, ELSS is often more tax-efficient.

FD Interest When Interest is Paid Annually vs at Maturity

Tax applies on accrual basis — even if interest is paid at maturity (cumulative FDs), you must report the interest accrued each year in that year's ITR. Many people wait until maturity and report entire interest in one year — this creates problems:

• Risk of TDS mismatch across years
• Potential bunching of income in one year → higher tax bracket

Best practice: Request annual interest certificate from bank and report year-by-year.

How to Check FD TDS in Form 26AS

• Login to incometax.gov.in → View Form 26AS or Annual Information Statement (AIS)
• All TDS deducted by banks on FD interest reflects here
• AIS also shows full FD interest earned (even if below TDS threshold)
• Cross-check AIS with your bank statements before filing ITR

Reporting FD Interest in ITR

• Use ITR-1 or ITR-2 (not ITR-1 if capital gains exist)
• Report under "Income from Other Sources" → "Interest from Deposits"
• Claim TDS credit under TDS schedule — matches Form 26AS automatically
• Any excess TDS becomes refund; shortfall means additional tax payable