What is the TDS on Fixed Deposits?

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

How can I apply for a TDS waiver?

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

Can I avoid paying TDS on Fixed Deposits?

You can get a waiver on the deduction of TDS on FD interest if you meet the eligibility criteria of having annual income under the taxable limit.

TDS on Fixed Deposits

Q: Can a foreign citizen apply for TDS waivers?

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

Q: What is the TDS on ₹10,000 interest?

As per the current TDS on FD interest limit, interest earning of ₹10,000 is not subject to tax deduction at source since it is under ₹40,000. However, if the interest is from other sources, the TDS rate will vary based on the earning source (lottery, security investment, dividends, etc.)

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Fixed Deposits, or FDs, have remained one of the most popular investment avenues for those interested in risk-averse schemes. All you do is deposit a lump sum amount and accrue interest based on the rate at which you book the FD.

However, the returns that you earn on FD investment are subject to certain 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.

This can help you invest in a more informed manner and maximise your returns while complying with tax rules. To know more about TDS on FD interest, rates, exceptions, and more, read on.

How is TDS on FD Interest Calculated

Fixed Deposits are the preferred form of long-term investment but are subject to a tax deduction, which can impact the returns you get. 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%
Time Deposit (Post Office)	10%

TDS makes the taxation process simpler since the deduction is at the source by the FD issuer. 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	Bank FD: TDS of 10% if the annual income from FD interest exceeds ₹40,000 for regular citizens TDS of 10% if the yearly income generated through FD investment is more than ₹50,000 for senior citizens NBFC FD: TDS of 10% if the annual income from FD interest exceeds ₹5,000 TDS of 20% if the interest earned exceeds the threshold limit and you have failed to share PAN details with the NBFC
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	The primary account holder needs to furnish their PAN details in case of a joint FD account The secondary account holder is liable to pay taxes on joint FD account returns.

When is TDS Deducted on Bank FDs?

Here are a few things to note about TDS deduction on Bank FD interest:

TDS is levied at 10% when the yearly interest amount exceeds ₹40,000
TDS on FD for senior citizens is relaxed and set at ₹50,000 annually

If the interest exceeds this limit, the TDS deduction is for the whole amount and not just the amount beyond the exemption limit

Note that 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 to open 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 calculator. The FD interest rate calculator is a simple online tool that helps you determine your FD returns conveniently and hassle-freely.

To determine your returns, all you need to do is enter your FD investment amount, tenor, and interest rate in the calculator.

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.

TDS Waiver and How to Apply for It

The TDS waiver is meant for those that have income under taxable brackets. There are two types of waivers in place that can be availed through two different forms, 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. Meet the branch operations manager or the branch manager and ask for the applicable form, 15G or 15H. 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. This process may take a couple of days.

2. Online

With India going digital, several financial institutions have begun making the process of filing for a waiver fully online. For such an online process, you can follow the simple steps mentioned below:

Log in with your username and password
Search for the Tax section and select Tax Deductions or TDS from the list of options
Select the relevant form, either Form 15G or Form 15H, from the options and fill it
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.

How to Pay TDS on FD?

TDS on FD interest, as its name suggests, is deducted by the financial institution 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 to Claim TDS Refund

In case the tax deducted at the source is more than it should be, you can claim a refund for it. To claim a TDS refund, you need to follow these simple steps:

Open your web-based device and go to the website of the Income Tax Department website
Login to your account using the credentials
Choose and file the relevant ITR form
Submit the form and e-verify it to claim your refund

Exemption Limit for TDS

There are a set of prescribed rules under sections 192, 193, and 194 of the Income Tax Act. These outline the thresholds under which TDS is not applicable as of FY 23-34. Here are a few of them:

TDS on salary does not apply for income up to ₹3 Lakhs

TDS on prematurely withdrawing from EPF accounts is exempt up to ₹50,000
TDS on interest from securities is exempt up to ₹5,000 for debentures and up to ₹10,000 for savings bonds of 8% or 7.75%
TDS on income from winning the lottery is not applicable up to ₹10,000 whereas income from online games does not have any exemption
TDS on income from dividends is applicable only if it exceeds ₹5,000
TDS on rent is applicable only if it goes over ₹50,000
TDS on income earned from the National Savings Scheme (NSS) is applicable only over ₹2,500

Rules of TDS on FDs

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

Your bank/NBFC will determine your yearly income based on all the FDs you own with that particular bank or NBFC to apply TDS on FD interest
The 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
Senior citizens are to use Form 15H in order to apply for tax exemptions
Those under the age of 60 years need to furnish form 15G for tax exemptions
When your aggregate interest returns exceed ₹40,000 in a particular financial year, the amount will be subject to a deduction
The 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
If you fail to provide a PAN card, the applicable rate is raised to 20%
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.

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TDS is the tax deduction at the source of payment. In other words, the end customer doesn’t need to pay this tax, as it is paid by the financial intermediary that pays the amount. It is levied in various transactions in accordance with the Income Tax Act.

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.

Tax Deducted at Source applies on fixed deposits offered by banks and NBFCs. However, the threshold limit for TDS on the interest income varies depending on the type of FD, i.e., bank FD or NBFC FD and the age group the individual falls into.

For Bank FDs, the threshold limit for tax on interest earnings is set at ₹40,000 for citizens under the age of 60 and up to ₹50,000 for senior citizens, i.e., citizens over 60. The TDS on FD interest is deducted at 10%.

As for NBFC FDs, the threshold limit for tax on interest income is ₹5,000. TDS is deducted at 10% if the earnings exceed ₹5,000. Furthermore, failing to share the Permanent Account Number (PAN) details and exceeding the threshold in interest earnings will attract a TDS of 20% on the interest earned.

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.

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.

As per the current TDS deduction on the bank fixed deposit limit, interest-earning of ₹10,000 is not subject to tax deduction at source since it is under ₹40,000.

However, if the interest is from other sources, the TDS rate will vary based on the earning source (lottery, security investment, dividends, etc).

You can get a waiver on the TDS if you meet the eligibility criteria of having annual income under the taxable limit.

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

TDS doesn’t need to be filed online or offline. You may, however, visit the official income tax homage to know about this process in detail.

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