Banking
FD Taxation: How Fixed Deposit Interest Is Taxed
Last updated 17 June 2026Key Takeaways
- FD interest is fully taxable at your slab rate, under "Income from Other Sources".
- TDS is 10% with PAN, 20% without PAN, once interest crosses the threshold.
- FY2025-26 TDS thresholds: ₹50,000 (general) and ₹1,00,000 (senior citizens).
- TDS ≠ final tax — interest is taxable even if no TDS was deducted; report it in your ITR.
- Tax-saving FDs give an 80C deduction on the deposit, but the interest remains taxable.
Is FD Interest Taxable?
Yes — all interest you earn on a fixed deposit is taxable, whether the FD is a regular one or a tax-saving one. The interest is treated as "Income from Other Sources" and added to your total income for the year, then taxed at whatever income-tax slab applies to you.
There is a common myth that FD interest is only taxed if the bank deducts TDS, or only the amount above the TDS threshold is taxable. Neither is true: the whole interest is taxable, and TDS is merely tax collected in advance (see below).
How FD Interest Is Taxed
The mechanism is straightforward:
- The bank credits interest to you (see how FD interest is calculated).
- That interest is added to your income for the year under "Income from Other Sources".
- Your total income is taxed at your slab rate — so FD interest is effectively taxed at whatever marginal rate you fall into.
- Any TDS already deducted by the bank is credited against your final tax liability when you file your return.
So a person in the 30% slab ultimately pays 30% on their FD interest, even though TDS may have been deducted at only 10%; the balance is settled through the ITR.
TDS Rules (FY2025-26)
Under Section 194A, banks deduct TDS on FD interest once your interest at that bank in a financial year crosses a threshold.
| Depositor Type | FY 2025-26 TDS Threshold |
|---|---|
| General depositor | ₹50,000 |
| Senior citizen | ₹1,00,000 |
- The TDS rate is 10% if your PAN is registered with the bank, and 20% if it is not.
- These thresholds were raised in Budget 2025 (previously ₹40,000 general / ₹50,000 senior).
- The threshold is per bank — interest is generally aggregated across your branches of the same bank.
- Crossing the threshold triggers TDS, but (as above) the entire interest remains taxable, not just the excess.
Senior Citizen Provisions
Senior citizens (aged 60+) get meaningful relief:
- A higher TDS threshold of ₹1,00,000 (FY2025-26) before the bank deducts TDS.
- The Section 80TTB deduction (below).
- The ability to file Form 15H to stop TDS where eligible.
For more on the preferential rate itself, see senior citizen fixed deposits.
Section 80TTB
Section 80TTB lets senior citizens claim a deduction of up to ₹50,000 on interest income from deposits — including fixed deposits, recurring deposits and savings accounts — held with banks, co-operative banks or post offices. This deduction reduces the taxable portion of their interest income. (Non-senior individuals instead get the smaller Section 80TTA deduction, which applies only to savings-account interest, not FD interest.)
Form 15G vs Form 15H
If your total income is below the taxable limit, you can ask the bank not to deduct TDS by submitting a self-declaration:
- Form 15G — for resident individuals below 60 (and HUFs) whose total income is below the taxable limit.
- Form 15H — for resident senior citizens (60+) whose tax liability is nil.
Important: these forms are a declaration that no tax is payable. If your income is in fact taxable, submitting them is incorrect — and the interest still has to be reported and taxed. Submit the form at the start of the financial year to each bank where you hold deposits.
Tax-Saving FD Treatment
A tax-saving FD is a specific 5-year fixed deposit that qualifies for a deduction under Section 80C:
- You can claim the amount invested (up to ₹1.5 lakh, within the overall 80C limit) as a deduction.
- It has a mandatory 5-year lock-in — no premature withdrawal and no loan against it during this period (unlike a regular FD; see FD premature withdrawal).
- Crucially, the interest is still fully taxable — only the principal invested gets the 80C benefit.
| Topic | Regular FD | Tax-Saving FD |
|---|---|---|
| Interest taxable | Yes | Yes |
| Section 80C deduction | No | Yes |
| Premature withdrawal | Usually allowed | Not allowed during lock-in |
| Lock-in | Bank dependent | 5 years |
Reporting FD Interest in Your ITR
When you file your income-tax return:
- Report FD interest under "Income from Other Sources" — include interest accrued for the year, not only interest paid out.
- Claim credit for any TDS the bank deducted (it appears in your Form 26AS / Annual Information Statement).
- Senior citizens claim the 80TTB deduction here.
- Pay any balance tax if your slab rate is higher than the 10% TDS already deducted.
Even if no TDS was deducted, you must still report and pay tax on the interest.
Worked Examples
These are illustrative.
Example 1 — Slab vs TDS. You're in the 30% slab and earn ₹60,000 FD interest. The bank deducts 10% TDS = ₹6,000 (since interest exceeds the ₹50,000 threshold). But your actual tax on that interest is 30% = ₹18,000, so you pay the ₹12,000 balance through your ITR.
Example 2 — No PAN. On the same ₹60,000 interest, if your PAN isn't registered, TDS is deducted at 20% = ₹12,000 instead of ₹6,000 — so always register your PAN.
Example 3 — Senior citizen below threshold. A senior citizen earns ₹90,000 FD interest. As it's below the ₹1,00,000 senior threshold, no TDS is deducted — but the interest is still taxable. They report it in their ITR and can claim the ₹50,000 Section 80TTB deduction, leaving ₹40,000 taxable at their slab.
Common Mistakes to Avoid
- Assuming "no TDS" means "no tax". Interest is taxable even if the bank didn't deduct TDS.
- Thinking tax-saving FD interest is exempt. Only the principal gets the 80C deduction; the interest is taxable.
- Submitting Form 15G/15H when your income is actually taxable — that's a false declaration.
- Not registering your PAN — leading to 20% TDS instead of 10%.
- Forgetting to claim TDS credit in your ITR, or omitting accrued interest.
Expert Verdict
The single biggest FD tax mistake is treating TDS as the whole story. It isn't — FD interest is taxed at your slab, and the bank's 10% deduction is just an advance. Register your PAN (to avoid 20% TDS), report all interest in your ITR (even where no TDS was cut), and — if you're a senior citizen — make sure you're claiming the Section 80TTB deduction. Use Form 15G/15H only if your income is genuinely below the taxable limit.
— The Tips4Banking Editorial Team · checked against Income Tax Department provisions and Budget 2025
Frequently asked questions
Is FD interest taxable in India?
Yes. All FD interest is taxable as "Income from Other Sources" and taxed at your income-tax slab rate, whether it's a regular or a tax-saving FD.
What is the TDS rate on FD interest?
10% if your PAN is registered with the bank, and 20% if it is not. TDS applies once your interest at that bank crosses the annual threshold.
What are the FY2025-26 TDS thresholds for FDs?
₹50,000 for general depositors and ₹1,00,000 for senior citizens. These were raised in Budget 2025 from the earlier ₹40,000 and ₹50,000 limits.
If no TDS is deducted, do I still need to report FD interest?
Yes. FD interest is generally taxable even if TDS is not deducted. Taxpayers are responsible for reporting applicable interest income in their income-tax return.
What is Section 80TTB?
It lets senior citizens claim a deduction of up to ₹50,000 on interest income from deposits (including FDs, RDs and savings accounts), reducing their taxable interest.
What's the difference between Form 15G and Form 15H?
Form 15G is for resident individuals below 60 whose income is below the taxable limit; Form 15H is for resident senior citizens (60+) with nil tax liability. Both ask the bank not to deduct TDS.
Is interest on a tax-saving FD tax-free?
No. A tax-saving 5-year FD gives an 80C deduction on the amount invested (up to ₹1.5 lakh), but the interest earned is fully taxable.
Can I withdraw a tax-saving FD early?
No. A tax-saving FD has a mandatory 5-year lock-in and cannot be withdrawn prematurely, unlike a regular FD.
How do I avoid excess TDS on my FD?
Register your PAN to ensure 10% (not 20%) TDS, and — only if your income is below the taxable limit — submit Form 15G (or 15H for seniors). You can also claim a refund through your ITR if excess TDS was deducted.
Sources
- Income Tax Department — Official portal (Sections 194A, 80C, 80TTB; ITR reporting): https://www.incometax.gov.in/
- HDFC Bank — TDS on Fixed Deposit Interest: https://www.hdfcbank.com/personal/save/deposits/fixed-deposit-interest-rate
- ICICI Bank — Fixed Deposit / Tax-Saver FD guidance: https://www.icicibank.com/Personal-Banking/account-deposit/fixed-deposit/index.page
- Press Information Bureau / Union Budget 2025 — Revised TDS thresholds on interest (Section 194A): https://www.indiabudget.gov.in/
Information only — not tax advice. Tax rules and thresholds change at each Budget (figures shown are FY2025-26); verify the current position with the Income Tax Department or a qualified tax professional before acting.