TDS on Fixed Deposit Interest - Calculation, Waiver & Rules 12 Sep 2024

Get up to 9.40% p.a. interest, inclusive of additional benefit of 0.50% p.a. for senior citizens and 0.10% p.a. for women Open an FD

The interest earned from an FD is fully taxable and subject to Tax Deducted at Source (TDS). This amount is debited by the issuer before crediting the interest amount in your account. If the interest received in a financial year exceeds the specified thresholds, a 10% TDS is applicable.

Tax deduction on fixed deposits is higher if you have not submitted PAN details. In this case, the FD issuer will deduct 20% TDS instead. No TDS will be deducted if your total taxable income is below the tax exemption threshold limit. This is provided you submit Form 15G/H depending on your age group.

Understand TDS on an FD with an Example

Here’s an illustrative example of how TDS deduction on FD interest works. Consider that you are an individual aged below 60 years who has invested in 3 fixed deposits. Say your interest income on these FDs is ₹50,000, ₹30,000, and ₹20,000, respectively. For non-senior citizens, TDS applies if your total interest income from FDs exceeds ₹40,000 in a financial year.

Fixed Deposit	Interest Income	Tax Deducted at Source
FD 1	₹50,000	TDS is applicable
FD 2	₹30,000	No TDS (Interest below limit)
FD 3	₹20,000	No TDS (Interest below limit)

TDS will apply on your first fixed deposit where your interest income exceeds the exemption limit of ₹40,000. Hence, TDS will be deducted at 10% at ₹4,000.

Now, assume you are a retired individual aged over 60 years. Similar to the previous example, you have booked 2 FDs. Here, your interest income from these investments stands at ₹55,000 and ₹45,000, respectively. For senior citizens, the TDS threshold stands at ₹50,000 per financial year.

Fixed Deposit	Interest Income	Tax Deducted at Source
FD 1	₹55,000	TDS is applicable
FD 2	₹45,000	No TDS (Interest below limit)

In this instance, TDS is applicable on the first FD since the interest earned goes over the limit by ₹5,000. Therefore, the 10% TDS will stand at ₹5,500.

How to Calculate TDS on Fixed Deposit Interest

All interest income beyond a threshold from your fixed deposits is taxable. Whether or not your bank deducts TDS, you must include this amount in your total income when filing an Income Tax Return (ITR).

The income you earn from an FD is categorised under the head 'Income from Other Sources'. If your bank has deducted TDS, this amount will be adjusted against your overall tax liability. You can verify the exact TDS on FD interest by checking your Form 26AS.

Remember, even if you don't receive the interest income directly, you still need to declare it in your ITR.

Exemption Limit for TDS Deduction on an FD

The TDS on FDs is subject to certain exemptions. Here are the TDS limits on FD interest for different taxpayers:

TDS on FD interest for individuals under 60 years does not apply if the total annual interest income is below ₹40,000
For senior citizens, the exemption limit for TDS is ₹50,000
No TDS will be deducted if you choose the new tax regime and your total taxable income is under ₹3 Lakhs
TDS will also not apply if you have opted for the old tax regime and your taxable income is below ₹2.5 Lakhs

How to Get a TDS Waiver

If your total taxable income is below the tax limit, you could opt to submit Form 15G/H to avoid TDS deductions on FD interest.

Form Type	Who Can Get a Waiver
Form 15G	Non-senior citizens who have earned income under the taxable income threshold
Form 15H	Senior citizens whose income is under the taxable limit

Check out the methods through which you can apply for a waiver from FD TDS deduction:

Apply Offline

Follow these simple steps to get a TDS waiver offline:

Visit the bank where you have the FD account
Request for the applicable form and fill in the relevant details
Attach all the physical verification documents, such as your PAN card
The bank will verify the submitted documents and approve your request

Apply Online

Follow these steps to complete the application process for a waiver on TDS online:

Visit the Income Tax Filing Portal
Click on the ‘e-file’ button and select the ‘Prepare & Submit Online Form (Other than ITR)’ option
Click on the ‘Form 15G/Form 15H (Consolidated)’ category and prepare an XML zip file
Generate an e-signature for the zip file through the Digital Signature Certificate (DSC) Management Utility
Log in to the portal using the Tax Deduction and Collection Account Number (TAN)
Click on the ‘e-file’ button and choose the ‘Upload Form 15G/15H’ option
Attach the zip file along with the e-signature
You will find a competition message upon successful attachment of the file

Rules of TDS on Fixed Deposits

Understanding the tax implications is crucial when selecting this investment avenue. Here are some conditions pertaining to TDS on fixed deposit interest:

The issuer will determine your annual interest income by taking into account all the FDs you have booked with them
The TDS on FD is calculated on interest earnings and not the principal amount
The computation of the FD tax rate will be in accordance with the tax slabs you fall under
The TDS will be deducted from the PAN of the primary account holder in case of a joint FD account
The interest earned on tax-saving FDs will also attract TDS

What is the rate for TDS on FD?

If you have furnished a PAN card, you will have to pay TDS at 10%. If you have not submitted PAN details, the applicable TDS on FD interest will be 20%.

Who deducts TDS on fixed deposit interest?

Issuers are responsible for deducting TDS when making the interest payment. Generally, banks deduct TDS automatically at the end of every financial year.

How much FD interest is tax-free?

If you are below 60 years of age, an annual interest income of over ₹40,000 does not attract TDS. For senior citizens, this exemption limit is ₹50,000 in a financial year. You can also avoid paying taxes on FD interest if your total income is below the taxable limit.

How can I apply for a TDS waiver?

You could avoid paying taxes on FD interest by submitting Form 15G if you're under 60 years, or Form 15H if you're over 60 years. This is provided that your total taxable income is below the threshold.

What is the TDS on the Fixed Deposit rate for NRIs?

Non-resident Indians (NRIs) need to pay a TDS at 30% for a Non-resident Ordinary (NRO) FD account. Interest earned on Non-resident External (NRE) accounts are tax-free.