Income Tax and TDS on Fixed Deposit Interest in India 2025
The interest one earns on their fixed deposit is taxable according to the Income Tax Act, 1961. If you are someone who has fixed deposits, it is essential to know all about the taxation on the interest from fixed deposits. Let’s examine the key points you need to know about taxation and TDS on fixed deposit interest income:
How is the Tax on Fixed Deposits Charged?
Interest incurred on fixed deposits is taxable under the Income Tax Act. It should be reported under ‘income from other sources’ in your tax return. Your interest is taxed according to your income tax slab. The tax is charged at the time of interest credit and not when the fixed deposit matures.
TDS on Fixed Deposit Interest Income
TDS refers to the tax that is deducted from certain payments made to individuals. For fixed deposits, a certain percentage tax is charged if the interest income exceeds the limit. According to the Union Budget 2025-2026, the threshold for TDS (Tax at Source) exemption limit on fixed deposits is Rs.50000 for regular citizens. For senior citizens, it has been increased to Rs.1 lakh. The TDS charged on fixed deposit interest rates is 10% currently if you submit your PAN card and 20% if you don't. It is also to be noted that if your total interest income is under Rs.4 lakh, it is exempt from TDS.
How to Calculate Income Tax on Fixed Deposit Interest Income
To calculate tax on fixed deposit interest income, you can add the interest income from the fixed deposit to your total income.
When to Pay Tax on Fixed Deposit Interest Income?
It is ideal to pay tax when you see that there is a tax liability on adding interest income to your total income. It is to be paid while filing the income tax return for the year. It is also important to pay it without waiting for the fixed deposit to mature, as it can result in higher tax.
What are Forms 15G and 15H?
15G and 15H are forms you can submit to your bank when your total income, including interest income, doesn't cross the threshold, but your interest from a fixed deposit in a year is above Rs.50,000. In such cases, banks cannot deduct TDS. Form 15H can be submitted by senior citizens (60 to 80 years old), and 15G, by regular citizens under 60 years. You can file for 15G if your total income is below Rs.4 Lakh.
FAQs on Income Tax and TDS on Fixed Deposit Interest in India
- How can I avoid TDS on fixed deposit interest income?
To ensure deduction, you must submit Form 15G or 15H to your bank, according to your age group. This exempts you from TDS deduction on interest income if your total income does not cross the threshold.
- Is there a tax exemption on fixed deposit interest income for senior citizens?
Yes, the TDS exemption limit for senior citizens has been increased to Rs.1 lakh from Rs.50000 with effect from April 2025.
- Will I have to pay TDS if my total income is Rs.3 lakhs?
No, your total income is less than the maximum taxable amount, which is Rs.4 lakh, as per the new tax rules introduced in the 2025-2026 Union budget.
- Is recurring deposit (RD) interest income taxable?
Yes, interest income on recurring deposits is also taxable.
- Is the interest income earned from fixed deposits with NBFCs also taxable?
Yes, fixed deposits in NBFCs are fully taxable, according to the tax slab that applies to you.
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