How TDS on FD interest works
When you earn interest on a Fixed Deposit, the bank deducts Tax Deducted at Source (TDS) at 10% if your total interest from that one bank exceeds:
- ₹40,000 per year (under 60 years old)
- ₹50,000 per year (senior citizens, 60+)
This is per bank — not aggregated across banks. So if you have FDs at SBI (₹35,000 interest) + HDFC (₹35,000 interest) = ₹70,000 total but neither crosses ₹40,000 — no TDS.
If you don't submit PAN to the bank, TDS doubles to 20%. Always submit PAN.
TDS is NOT your final tax
Many Indians think TDS = tax paid. Wrong.
TDS is just an advance payment. Your actual tax is calculated on all your FD interest at your income slab rate in your ITR: - 0-3L: 0% - 3-7L: 5% - 7-10L: 10% - 10-12L: 15% - 12-15L: 20% - 15L+: 30%
(New regime FY 2026-27)
If you're in the 30% slab, the bank deducted only 10%. You owe an extra 20% in your ITR. If you're in 0-5% slab, you over-paid via TDS — claim refund in ITR.
Form 15G and Form 15H — when to submit
These are self-declarations that say "my total income is below the taxable threshold, please don't deduct TDS."
### Form 15G (under 60 years) Submit if: - Total income for the year (salary + FD interest + other sources) is below ₹2.5 lakh (basic exemption) - AND you're not liable to pay any tax for the year
### Form 15H (60+ years senior citizens) Submit if: - Total income for the year is below ₹3 lakh (senior citizen exemption) - AND you're not liable to pay tax for the year
Both forms are valid for one financial year only. Resubmit every year (typically April).
### Important: don't submit falsely If you submit 15G/15H but your total income IS taxable, banks will eventually report this to the income tax department. Penalty under Section 277: imprisonment 6 months to 7 years + fine. Do not submit false declarations.
How to submit Form 15G/15H
Most banks now offer this online:
1. Login to bank's net banking 2. Find "Form 15G/15H Submission" (usually under "Tax & Compliance" or "Service Requests") 3. Verify PAN, declare your income status 4. Submit before each FY's start (April), or at the time of opening a new FD 5. Get acknowledgment receipt — keep it
Bank stops deducting TDS that year for FDs at that branch.
Section 80TTA and 80TTB — bonus deductions
### Section 80TTA (under 60) - Deduction up to ₹10,000/year on interest from savings account (NOT FD) - For SB account interest only - Old regime only (not in new regime)
### Section 80TTB (senior citizens 60+) - Deduction up to ₹50,000/year on interest from savings + FD + RD + post office deposits - All deposit-type interest combined - Old regime only (not in new regime)
Senior citizens save substantially: ₹50K × 30% = ₹15K extra tax saving per year (if in top slab).
Worked example: ₹15 lakh in FDs at 7%
Arjun, 45, has ₹15 lakh across FDs at SBI (₹10L) and HDFC (₹5L). Total annual interest: ~₹1.05 lakh.
### Without Form 15G (assuming his total income is ₹12L, in 20% slab) - SBI deducts: 10% × ₹70K = ₹7,000 TDS - HDFC deducts: 10% × ₹35K = ₹3,500 TDS - Total TDS: ₹10,500 - Actual tax owed: ₹1,05,000 × 20% = ₹21,000 - Net additional tax in ITR: ₹10,500
### Without Form 15G (his total income is below ₹2.5L) - Same TDS deducted: ₹10,500 - Actual tax owed: ₹0 - He claims refund of ₹10,500 in his ITR — but waits 6-9 months
### With Form 15G (his total income is below ₹2.5L) - SBI: No TDS deducted - HDFC: No TDS deducted - Cash flow saved: ₹10,500 in his account, no waiting for refund
When TDS doesn't trigger
TDS isn't deducted if: - Total interest from that bank is below ₹40K (₹50K senior) - You submit valid Form 15G/15H - The FD is a "tax-saving FD" under Section 80C (5-year lock-in) — TDS still deducted on interest, but the deposit qualifies for ₹1.5L 80C deduction
Even with no TDS, you still must report and pay tax on this interest in your ITR if your total income is taxable.
TDS for cooperative banks and post office
- Cooperative banks: Same TDS rules apply, ₹40K/₹50K threshold per bank.
- Post Office Time Deposit, MIS, SCSS: No TDS up to ₹50K (₹40K for non-senior). Above this, TDS at 10%. But many post offices don't actually deduct TDS systematically — the responsibility shifts to you to declare in ITR.
What if multiple banks aggregate to over ₹40K?
If you have ₹35K interest at SBI + ₹35K at HDFC = ₹70K total. No TDS at either bank (each below ₹40K). But you still must declare ₹70K in your ITR and pay slab-rate tax on it.
Tax officers can match this against your bank statements via Form 26AS / AIS reports. Don't hide it.
How to avoid surprise tax bills
1. Quarterly: track all FD interest accrued. Use a simple spreadsheet. 2. End of FY: total all FD interest. Add to your salary income. 3. Calculate marginal tax owed = (Total FD interest × your slab rate) − TDS already deducted. 4. Pay self-assessment tax in March 2026 if shortfall > ₹10,000 (avoids interest under Section 234B). 5. Claim 80TTA/80TTB if eligible.
The "split FDs to avoid TDS" myth
Some people split FDs across spouse and kids to keep each below ₹40K. Doesn't work: - Section 64 (clubbing) — interest income on FDs in spouse's name goes back to your tax bill if you transferred funds without consideration. - Income clubbing also applies to minor's FDs (added to higher-earning parent).
The legitimate way to reduce TDS is to: 1. Use Form 15G if eligible 2. Distribute FDs across multiple banks (each <₹40K threshold) 3. Use SCSS (senior citizens get higher threshold + 80TTB) 4. Use POMIS for monthly income (different tax structure)
Senior citizens — the FD tax sweet spot
For citizens 60+ in old regime: - Basic exemption: ₹3 lakh (vs ₹2.5L general) - Section 80TTB: ₹50K extra deduction on bank/post office interest - TDS threshold: ₹50K (vs ₹40K general)
Combined: a senior with ₹15L in FDs earning ~₹1L interest pays nearly zero tax under old regime if other deductions stack.