Tax on Fixed Deposit Interest: TDS, Tax Slab & Form 15G/H Guide

Tax on Fixed Deposit interest is something most salaried professionals in India overlook until ITR filing season. Fixed deposits are predictable, the capital is safe, and the returns are guaranteed. But the interest you earn is not tax-free. It gets added to your total income and taxed at your applicable slab rate. And in many cases, the bank has already deducted TDS before you even receive the interest.

In my 7 years of working with salaried professionals and retirees on income tax planning, I find that FD interest is consistently the most misunderstood income head. Many professionals assume that if TDS has been deducted, there is nothing left to do at ITR time. That assumption ends up costing them at ITR filing.

This guide covers how FD interest is taxed for FY 2025-26, when TDS applies, the updated thresholds introduced this year, and how Form 15G and Form 15H work.

Is FD Interest Taxable in India?

Yes, FD interest is fully taxable. It falls under the head “Income from Other Sources” under the Income Tax Act. There is no separate rate or flat tax for FD interest; it simply gets added to your total income and taxed at your slab rate.

This applies to all of the following:

• Bank fixed deposits (nationalised, private, small finance banks)
• Post office term deposits
• Corporate fixed deposits
• Recurring deposits (RDs follow the same taxation rule)

There is no exemption on FD interest under the new tax regime. Under the old regime, senior citizens can claim a deduction of up to Rs. 50,000 on interest income under Section 80TTB, but that deduction does not change how TDS is governed at the bank level.

When Does the Bank Deduct TDS on FD Interest?

TDS on FD interest is governed by Section 194A of the Income Tax Act. The bank deducts TDS at 10% when your total FD interest from that bank crosses the exemption threshold in a financial year.

For FY 2025-26, the updated thresholds are:

These limits were revised in Budget 2025. Until FY 2024-25, the threshold was Rs. 40,000 for regular citizens and Rs. 50,000 for senior citizens.

Two things I want salaried professionals to be clear on here:

TDS is calculated per bank, not across all banks. If you have FDs in two different banks earning Rs. 45,000 interest each, neither bank will deduct TDS because neither crosses Rs. 50,000 individually. Your total FD income is Rs. 90,000, but you still need to declare it in your ITR. TDS not being deducted does not mean the income is exempt.

TDS is deducted when interest is credited, not at maturity. If you have a 3-year FD, the bank calculates accrued interest at the end of each financial year and deducts TDS at that point, even if you have not received any payout yet.

How Is Tax on Fixed Deposit Interest Actually Calculated?

FD interest is added to your gross total income and taxed at your slab rate. There is no flat tax on it.

Here is a worked example for a salaried professional under the new regime.

Example: Salary Rs. 12 lakh + FD interest Rs. 80,000

The bank deducted TDS of Rs. 3,000 on Rs. 30,000, which is the portion of FD interest above the Rs. 50,000 threshold. The remaining Rs. 60,180 needs to be paid either as advance tax during the year or as self-assessment tax before filing the ITR.

To understand how your overall tax liability is computed under both regimes, my guide on the old vs new tax regime covers this in detail.

What If Your Total Income Is Below the Taxable Limit?

If your total income including FD interest is below the basic exemption limit, your tax liability is zero. But the bank will still deduct TDS if your FD interest crosses the threshold, unless you submit Form 15G or Form 15H proactively.

Under the new tax regime, income up to Rs. 12 lakh effectively attracts zero tax due to the Section 87A rebate. However, Form 15G and Form 15H eligibility is determined by the basic exemption limit and your actual tax liability, not the rebate threshold. The basic exemption limit is Rs. 4 lakh under the new regime and Rs. 2.5 lakh under the old regime.

Form 15G and Form 15H: How to Avoid Excess TDS

Form 15G and Form 15H are self-declaration forms submitted to your bank at the start of each financial year. When the bank accepts these forms, it does not deduct TDS on your FD interest for that year.

Form 15G is for individuals below 60 years of age. To submit it, two conditions need to be satisfied:

• Your estimated total income for the year must be below the basic exemption limit (Rs. 2.5 lakh under old regime, Rs. 4 lakh under new regime)
• Your total interest income for the year should not exceed the basic exemption limit

Form 15H is for senior citizens aged 60 and above. The condition here is straightforward: your estimated total tax liability for the year should be nil.

Both forms must be submitted at the start of the financial year, ideally in April. If you miss the window and TDS has already been deducted, the bank cannot reverse it. Your only recourse is to claim that TDS as a refund when you file your ITR.

You can submit these forms directly on the income tax portal at https://www.incometax.gov.in or physically at your bank branch.

These forms are valid for one financial year only and must be resubmitted every year.

Under the New Income Tax Act 2025 (effective April 1, 2026), Form 15G and Form 15H have been renumbered as Form 121. However, for FY 2025-26 filings due in July 2026, the old form numbers continue to apply.

FD Interest and ITR Filing: What You Must Report

Even if the bank has deducted TDS, you must report your complete FD interest income in your ITR under “Income from Other Sources.” This is one of the most common gaps I see when reviewing returns for salaried professionals.

When filing your ITR, these are the four things I always tell professionals to check:

Step 1: Verify Form 26AS (now Form 168). Check the TDS amount your bank has deposited against your PAN and cross-check it with your bank’s TDS certificate. Any mismatch needs to be resolved before filing. My guide on how to read Form 26AS and AIS explains where to find this. You can also check my detailed comparison of AIS vs Form 26AS to understand which one takes precedence.

Step 2: Report the full interest amount, not just the taxable portion. If you earned Rs. 70,000 in FD interest and the bank deducted TDS on Rs. 20,000, you still declare the full Rs. 70,000 in your ITR.

Step 3: Include accrued interest on cumulative FDs. If your FD has not matured but interest has been accruing, you must declare that interest every year. Many professionals report it only in the year of maturity, which is incorrect and can attract notices.

Step 4: Claim your TDS credit. The TDS deducted by the bank gets adjusted against your final tax liability. If TDS exceeds what you actually owe, you will receive a refund. My guide on ITR refund status check covers how to track that.

If you are unsure which ITR form applies to you as a salaried professional with FD income, refer to my guide on which ITR form to file for FY 2025-26.

For filing your return end to end, my guide on how to file ITR online walks through the complete process.

Senior Citizens: Key Differences for FY 2025-26

Senior citizens have specific advantages under the current rules that are worth understanding separately.

Higher TDS threshold. TDS is not deducted unless FD interest from a single bank crosses Rs. 1 lakh in a financial year. This is double the regular citizen threshold and provides meaningful relief for retirees living on interest income.

Section 80TTB deduction under the old regime. Senior citizens can claim a deduction of up to Rs. 50,000 on interest income from banks, post offices, and cooperative societies under Section 80TTB. This deduction is not available under the new tax regime.

Form 15H eligibility. Senior citizens can submit Form 15H if their total tax liability for the year is nil. Even if FD interest is substantial, as long as deductions under the old regime bring taxable income to zero, Form 15H can be submitted.

Example: A retired professional receives pension of Rs. 5 lakh and earns FD interest of Rs. 90,000 in FY 2025-26. Since the FD interest is below the Rs. 1 lakh senior citizen threshold, the bank will not deduct any TDS. However, the Rs. 90,000 is still taxable income and must be declared in the ITR.

Advance Tax on FD Interest

If your total tax liability for the year exceeds Rs. 10,000, you may need to pay advance tax on your FD interest income. Your employer’s TDS covers your salary, but FD interest falls outside that. If the TDS deducted by the bank is not sufficient to cover your total tax due on that interest, the shortfall needs to be paid as advance tax by March 15.

Missing advance tax deadlines attracts interest under Sections 234B and 234C. My guide on advance tax payment covers how to calculate and pay this correctly.

FD Interest and Tax Slabs: FY 2025-26 Quick Reference

Since FD interest is added on top of salary income, the effective tax rate on it is whatever applies at your highest income bracket. A person in the 20% slab pays 20% on their FD interest, not 10%.

For FY 2025-26 under the new tax regime, the slabs are:

For the complete slab structure under both regimes, refer to my guide on income tax slabs FY 2026-27.

Conclusion

FD interest is simple to understand once you know the three moving parts: how it gets taxed, when the bank deducts TDS, and what you need to do at ITR time.

For FY 2025-26, the TDS threshold has been raised to Rs. 50,000 for regular citizens and Rs. 1 lakh for senior citizens. But crossing or staying below this threshold only determines whether the bank deducts TDS. It does not change your obligation to declare the full FD interest in your ITR.

The practical checklist is straightforward. Submit Form 15G or Form 15H in April if your tax liability is nil. Verify TDS in Form 26AS before filing. Report accrued interest on cumulative FDs every year, not just at maturity. And if your FD interest pushes your total tax liability above Rs. 10,000, factor in advance tax before March 15 to avoid interest under Sections 234B and 234C.

FD interest may feel like passive income, but it needs active tax management. Getting these steps right ensures you neither overpay through excess TDS nor face notices for underreporting.

Frequently Asked Questions

Is FD interest taxable even if I reinvest it? Yes. Whether you receive the interest as a payout or reinvest it in the same FD under the cumulative option, it is taxable in the year it accrues. Reinvestment does not defer the tax liability.

My FD interest is below Rs. 50,000. Do I still need to declare it in my ITR? Yes. Exemption from TDS deduction does not mean the income is exempt from tax. All FD interest, regardless of amount, must be reported under “Income from Other Sources” in your ITR.

Can I split FDs across family members to reduce tax? You can open FDs in different names, but the income is taxable in the hands of whoever owns the FD. If you transfer money to a spouse or minor child and they open an FD, clubbing provisions may apply and the interest could still be taxed in your hands.

What is the TDS rate if I have not submitted my PAN to the bank? TDS will be deducted at 20% instead of 10% if your PAN is not linked to your bank account. Always ensure your PAN is updated with your bank.

I missed submitting Form 15G this year. What should I do? TDS that has already been deducted cannot be reversed. File your ITR, declare the full FD interest, and claim the TDS as a refund if your actual tax liability is lower than what was deducted.

Does TDS on FD interest show up in Form 26AS? Yes. The TDS deducted by your bank is reflected in Form 26AS (Form 168 under the New Tax Act 2025). Always verify this before filing your return.

Written & Reviewed by

Diksha Chawla

Financial Educator & Content Creator | FinLecture.in

Diksha covers Indian income tax, mutual funds, ITR filing, and personal finance. FinLecture content is cross-checked against official government portals and SEBI/AMFI guidelines.

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