Fixed Deposits, or FDs, are one of the preferred investment avenues of risk-averse investors. All you do is deposit a lump sum amount and it accrues interest based on the rate at which you book the FD.

 

However, the returns that you earn on FD investment are subject to taxation. Before investing in these schemes, you must be aware of the tax implications on the interest you earn. For instance, FD issuers deduct TDS before paying the interest.

How is TDS on FD Interest Calculated

While fixed deposits may be a preferred option for long-term investment, they are subject to tax deduction. This could impact the returns you earn. As such, knowing the rate at which FD issuers calculate TDS on FD is crucial. 

 

The rate of this deduction depends on the type of deposit you choose. The table below denotes the various types of fixed deposits available and the tax rates that follow:

Type of FD

TDS Rate

Resident Indian FD Account

10% 

Non-resident Ordinary FD Account

30%

Non-resident External FD Account

0%

Foreign Currency Non-Resident

0%

TDS makes the taxation process simpler since the FD issuer deducts the amount. However, there are certain rules, exceptions, and conditions related to the deduction of TDS on FD interest for individuals and other investors.

TDS on FD Interest Rates

TDS, like GST, has a systematic tax structure based on the amount you earn as interest. Here are the particulars: 

Particulars

Tax Rate and Rules

Interest Income

  • Regular FD: TDS of 10% if the annual income from FD interest exceeds ₹40,000 for regular citizens (₹50,000 for senior citizens) 

  • NBFC FD: TDS of 10% if the annual income from FD interest exceeds ₹5,000; 20% if earnings exceed the threshold and PAN details are not submitted 

Documentation (PAN Details)

If you have not provided your PAN details, the tax rate levied is higher, i.e., 20%

Residence Status

Non-resident Indians may also have to pay other surcharges and cess tax

Joint Ownership of Account

  • Primary account holder needs to furnish their PAN details in case of a joint FD account

  • Secondary account holder is liable to pay taxes on joint FD account returns. 

 

The TDS rates on FDs are applicable as per the rules under Section 194A of the Income Tax Act of 1961. The Government of India may amend these rules which could bring changes to prevailing rates. 

 

Hence, it is crucial to check the current rates before you apply for an FD account. Once you know the rates, you can calculate the actual returns you would get after the deduction. 

 

To calculate your returns of FD before taxation, you can use an FD interest rate calculator. It is a simple online tool that helps you determine your FD returns conveniently. To determine your returns, you need to enter your FD investment amount, tenor, and interest rate in the calculator.

 

TDS Waiver and How to Apply for It

The TDS waiver is meant for those who have income under taxable brackets. There are two types of waivers, i.e. Form 15G and Form 15H. Both of these provide waivers to specific groups as listed below:

Form Type

Group Who Can Avail of a Waiver

Form 15G

Individuals who have earned income under the taxable income threshold 

Form 15H

Senior citizens whose income is under the taxable limit

It is crucial to remember that forms 15G and 15H are only applicable to Indian residents. Additionally, until March 31, 2023, NRIs were allowed to file Form 10F if they did not have a PAN to avoid additional TDS. 

 

If you are looking to apply for a TDS waiver, follow the simple steps mentioned below:

1.  Offline

Visit the bank where you have the FD account and request for the applicable form. Fill in all the details and attach all the physical verification documents, such as your PAN card copy. 

 

Then get it approved and ratified by the bank. However, this process may vary across issuers. 

2. Online

For the online process, you can follow the simple steps mentioned below: 

  • Log in on the e-filing portal with your username and password

  • Click on the ‘e-file’ option and then click on ‘Prepare & Submit Online Form (Other than ITR)’

  • Select the relevant form, either Form 15G or Form 15H, from the options and prepare the .XML .zip file

  • eSign and submit necessary documents

  • Download and save the acknowledgement slip once completed

 

Depending on the FD issuer, the steps that you will have to follow may differ. 

Rules of TDS on FDs

Here are the major rules you must follow regarding TDS on FD: 

  • Your bank/NBFC will determine your yearly income based on all the FDs you own with that particular bank or NBFC to calculate TDS

  • Calculations will be in accordance with your income tax slab

  • If you come under the highest income slab, you will be required to pay additional taxes along with the TDS rate on FD interest

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

  • If your total tax liability is under the amount deducted, you can claim a refund

  • In the case of joint accounts, the deduction is on the primary account holder’s PAN number
     

For senior citizens, the TDS on FD interest limit has been raised to ₹50,000 and ₹40,000 for regular citizens. Earlier, this limit was ₹10,000 per year, irrespective of the age of the investor.

Disclaimer

The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.

FAQs on TDS on Fixed Deposits

What is the TDS on Fixed Deposits?

TDS is applicable when your interest from fixed deposit exceeds the threshold limit. The limit for the same is ₹40,000 for non-senior citizens and ₹50,000 for senior citizens.

What is the rate for TDS on Fixed Deposits?

For FDs issued by banks, the threshold limit for tax on interest earnings is set at ₹40,000 for the general public and ₹50,000 for senior citizens. The TDS on fixed deposit is deducted at 10% or 20% if PAN details have not been furnished 

 

As for NBFC FDs, the threshold limit for tax on interest income is ₹5,000. TDS is deducted at 10% if the earnings exceed the limit. Furthermore, the TDS rate will be hiked to 20% if PAN has not been submitted. 

Who Deducts TDS on fixed deposit interest?

The TDS on fixed deposit interest is deducted by the issuer, i.e., banks or NBFCs, at the time of interest payout. These deductions are made to your FD returns, irrespective of whether you have opted for cumulative or non-cumulative FDs.

How to pay TDS on an FD?

TDS on FD interest, as its name suggests, is deducted by the issuer  at the source of payment. This eases the burden of tax payment and hence, you do not have to follow any process to pay the tax deducted at source on your fixed deposit.  

How can I apply for a TDS waiver?

Any resident of India with a PAN card can apply for a TDS waiver, provided their annual income is under the taxable limit. 

 

If you meet the set criteria, you can get a waiver on TDS on fixed deposits by filling up and submitting forms 15G (if non-senior citizens) or 15H (if senior citizens). This process can take a few days.

Can a foreign citizen apply for TDS waivers?

Until March 31, 2023, NRIs could submit Form 10F to avoid TDS without a PAN. You can get in touch with your bank for more details on waivers and exemptions.

Can I avoid paying TDS on Fixed Deposits?

You can get a waiver on the TDS on fixed deposit if your annual income is under the taxable limit. 

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

NRIs or non-resident Indians pay a higher rate of TDS on FD, i.e. 30% plus cess and surcharge.

How can I pay TDS online?

TDS doesn’t need to be filed online or offline. You may, however, visit the official Income Tax Department website to know about this process in detail.

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