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Everything You Needed to Know about TDS on FD Rates

As someone who earns, you are required to pay the government a certain amount based on the income you earn. If you’re a salaried employee you will already be familiar with the concept of TDS of ‘Tax Deduction at Source’ which is the amount preemptively cut from your salary before it comes to you. However, there are other instances where TDS also applied. 

 

For instance, chances are that you are also likely to have invested, or are looking to invest in a fixed deposit to provide your investment portfolio with some back end support through the security of savings. However, what you may not know is that you have to pay a certain amount of TDS on the interest you earn from your FD.

 

In this article, let’s look at how this TDS deduction limits bank interest, and the TDS rate that is applicable to you.

  • Form 15G

Form 15G states that in the event of an investor’s income being less than 2.5 lakhs per annum, he/she is required to pay no tax. However, the individual will have to file form 15G or 15H to avoid the TDS deducted by the bank on fixed deposit.

  • Form 15H

The clauses here are similar to 15G, except they apply exclusively to senior citizens.

Rules and Regulations for TDS Deducted by Bank on Fixed Deposit

  • The TDS on FD is based on the interest earned, not the principal amount.

  • Those who fall in the 20% and 30% tax brackets, can claim a refund of excess amounts through the IT department.

  • If investors fail to provide a PAN card, TDS is raised to 20%

  • In the cause of joint accounts, TDS is deducted based on the primary account holder’s PAN number.

  • For senior citizens, the TDS income limit has been raised from 10,000 to 50,000.

TDS Rates Applicable for Different Customers

Let’s take a look at the TDS deducted by the bank in fixed deposits for different customer types. 

Customer Type

TDS Rate.

NRI customer

30% plus surcharge and cess.

WIthout PAN

If you are an Indian Resident : 20%

If you are an NRI : 30%

Indian Resident.

10%

FAQs

  • ✔️What is the exemption limit for TDS?

    As of the assessment year 2020-2021, the TDS exemption limit for TDS deducted by the bank on fixed deposits is 2,50,000. 

  • ✔️What is the TDS rate on FD interest?

    TDS is only deducted on the interest earned from an FD. Therefore, for Indian residents, it is 10% and for NRIs, 30%. Once again, if you do not have your pan card, this rate is raised to 20% for residents and 30% for NRIs. 

  • ✔️How is TDS on Fixed Deposit calculated?

    Based on your TDS rate, for example, 10%, that amount is deducted from the interest you earn. Therefore, if you earn 100,000 in interest, at a TDS rate of 10%, you would be paying 10,000 as TDS.