TDS on Fixed Deposit: Rules, Limits, and How to Save Tax

You opened a Fixed Deposit expecting ₹50,000 in annual interest, but only ₹45,000 showed up. The missing ₹5,000? That's TDS — Tax Deducted at Source. Banks deduct it automatically, and most FD investors don't fully understand the rules until they see less money than expected.

The Basic TDS Rule on FD Interest

Banks deduct TDS at 10% on FD interest when your total interest income from all FDs at that bank exceeds ₹40,000 in a financial year. For senior citizens (60+), the threshold is ₹50,000.

Key details:

• TDS rate: 10% (if PAN is provided)
• TDS rate without PAN: 20% — always link your PAN to avoid this
• Threshold: ₹40,000 (general) / ₹50,000 (senior citizens)
• TDS is deducted on accrued interest, not just paid interest — even cumulative FDs face TDS annually on the interest earned that year

Practical Example

Rajesh has ₹8,00,000 in FDs at HDFC Bank at 7.00%. His annual interest: ₹56,000. Since this exceeds ₹40,000, the bank deducts TDS of ₹5,600 (10% of ₹56,000). Rajesh receives ₹50,400 in interest credit.

If Rajesh hadn't linked his PAN, the deduction would be ₹11,200 (20%). That's a costly oversight.

Form 15G and Form 15H — Avoid TDS Legally

If your total income for the year falls below the taxable limit (₹3,00,000 under the new tax regime for FY 2025-26), you can submit:

• **Form 15G** — For individuals below 60 years whose total income is below the taxable limit
• **Form 15H** — For senior citizens (60+) whose estimated tax liability is nil

Submit these forms at the beginning of every financial year to each bank where you hold FDs. Most banks accept them online through net banking now.

Important: Form 15G/15H only prevents TDS deduction. If your actual income turns out to be taxable, you still owe tax — you just pay it during filing instead of having it deducted upfront.

Section 80TTA and 80TTB — Deductions on Interest Income

• **Section 80TTA** — Available to individuals below 60. Deduction of up to ₹10,000 on interest from savings accounts only. FD interest does NOT qualify under 80TTA.
• **Section 80TTB** — Exclusively for senior citizens. Deduction of up to ₹50,000 on interest from all deposits — including FDs, savings accounts, and Post Office deposits. This is a significant benefit.

So a senior citizen earning ₹48,000 from FD interest can claim the entire amount under 80TTB and pay zero tax on it (under the old tax regime).

Tax-Saving FD Under Section 80C

A separate but related concept: 5-year tax-saving FDs let you claim deduction on the principal amount (up to ₹1,50,000) under Section 80C. However, the interest earned on tax-saving FDs is still fully taxable. Don't confuse the two.

Strategies to Minimize TDS Impact

• **Spread FDs across banks** — The ₹40,000 limit applies per bank. ₹3,00,000 in FDs at three different banks may keep each below the threshold.
• **Choose the right FD type** — Non-cumulative FDs with quarterly payouts may trigger TDS in smaller chunks that you can plan around.
• **Time your FDs** — Starting an FD in January means less interest accrual in that financial year (only 3 months), potentially staying under the limit.
• **Submit Form 15G/15H** — The simplest method if you qualify.

Claim TDS Refund If Over-Deducted

If TDS was deducted but your total income is below the taxable limit, file your ITR and claim a refund. The refund typically processes within 1-4 months. Check Form 26AS or AIS on the income tax portal to verify TDS credits before filing.

Use our [FD Calculator](/) to estimate your annual interest and figure out whether you'll cross the TDS threshold — before you open the deposit.