Tax on FD Interest: How TDS Works & Form 15G/15H
Understand TDS on fixed deposit interest, when banks deduct tax, how to submit Form 15G/15H to avoid TDS, and how to claim refund if excess TDS is deducted.
You open a Fixed Deposit expecting ₹50,000 in interest, but only receive ₹45,000. Where did ₹5,000 go? TDS—Tax Deducted at Source.
Understanding FD taxation can save you from unnecessary deductions and help you claim refunds. Let's decode it.
How FD Interest is Taxed
FD interest is fully taxable at your income tax slab rate. There's no special treatment like equity LTCG.
| Your Tax Bracket | Tax on ₹50,000 FD Interest |
|---|---|
| No tax (income < ₹2.5L) | ₹0 |
| 5% | ₹2,500 |
| 20% | ₹10,000 |
| 30% | ₹15,000 |
Key point: Banks deduct TDS at 10%, but your actual tax depends on your slab. This creates refund/additional payment scenarios.
Calculate your FD returns: Use our FD Calculator to see your maturity amount.
TDS on FD: The Basics
When is TDS Deducted?
Banks deduct TDS when total interest across all FDs with that bank exceeds ₹40,000 in a financial year.
| Category | TDS Threshold |
|---|---|
| Regular individuals | ₹40,000/year |
| Senior citizens (60+) | ₹50,000/year |
TDS Rate
| Situation | TDS Rate |
|---|---|
| PAN provided | 10% |
| PAN not provided | 20% |
Always provide PAN to your bank to avoid 20% TDS.
When is TDS Deducted (Timing)?
| FD Type | TDS Timing |
|---|---|
| Cumulative FD | At maturity or yearly, whichever is earlier |
| Non-cumulative (quarterly payout) | When interest is paid |
Important: For cumulative FDs, banks calculate annual interest and deduct TDS yearly, even though you don't receive the money until maturity.
TDS Scenarios Explained
Scenario 1: Interest Below ₹40,000
- FD interest: ₹35,000/year
- TDS deducted: ₹0
- Your action: Pay tax when filing ITR (if applicable)
Scenario 2: Interest Above ₹40,000, You're in 30% Bracket
- FD interest: ₹60,000/year
- TDS deducted: ₹6,000 (10%)
- Tax liability: ₹18,000 (30%)
- Your action: Pay additional ₹12,000 when filing ITR
Scenario 3: Interest Above ₹40,000, But Total Income Below Taxable Limit
- FD interest: ₹60,000/year
- Total income: ₹2,00,000 (below taxable limit)
- TDS deducted: ₹6,000 (10%)
- Your action: Claim ₹6,000 refund when filing ITR
Scenario 4: Senior Citizen, Interest ₹45,000
- FD interest: ₹45,000/year
- TDS threshold: ₹50,000 (higher for seniors)
- TDS deducted: ₹0
- Your action: Pay tax when filing ITR (if applicable)
Form 15G and 15H: Avoid TDS Legally
If your total income is below the taxable limit, you can submit Form 15G/15H to prevent TDS deduction altogether.
Form 15G: For Individuals Below 60
Eligibility:
- Must be resident individual (not company/firm)
- Age below 60
- Tax on total estimated income is NIL
- Total interest income doesn't exceed basic exemption limit
| For FY 2024-25 | Exemption Limit |
|---|---|
| General | ₹2,50,000 |
| Under new regime | ₹3,00,000 |
Form 15H: For Senior Citizens (60+)
Eligibility:
- Must be resident senior citizen (60+)
- Tax on total estimated income is NIL
| For FY 2024-25 | Exemption Limit |
|---|---|
| Senior citizens (60-80) | ₹3,00,000 |
| Super senior (80+) | ₹5,00,000 |
How to Submit Form 15G/15H
Option 1: Online (Recommended)
- Log into your bank's net banking
- Navigate to "Tax Center" or "Form 15G/15H"
- Fill details and submit digitally
- Download acknowledgment
Option 2: Branch Submission
- Download form from bank website or Income Tax portal
- Fill in duplicate
- Submit to branch before FD maturity
- Keep acknowledgment copy
When to Submit
| FD Type | Submit By |
|---|---|
| New FD | At the time of opening |
| Existing FD | Before financial year starts (April) |
| Renewal | Before renewal date |
Important: Form 15G/15H is valid for one financial year only. Submit fresh form every April.
Detailed Form 15G Walkthrough
Part I: Details to Fill
| Field | What to Enter |
|---|---|
| Name of assessee | Your full name as per PAN |
| PAN | Your 10-digit PAN |
| Status | Individual |
| Previous year | FY for which form is submitted |
| Residential status | Resident |
| Flat/Door/Building | Your address |
| Assessed in which ward | Leave blank if not known |
| Estimated income | FD interest expected this year |
| Estimated total income | All income sources added |
| Number of Form 15G filed | If submitting to multiple banks |
Part II: Declaration
| Field | What to Enter |
|---|---|
| Name and address of payer | Bank name and branch |
| Amount of income | Expected FD interest from this bank |
Common Mistakes to Avoid
- Wrong financial year - Form for FY 2024-25 should mention "2024-25"
- Underestimating income - If actual income exceeds estimate, you'll face penalty
- Submitting when not eligible - If total income is taxable, don't submit
- Not submitting to all banks - Submit to each bank separately
What If TDS is Already Deducted?
Step 1: Check Form 26AS
Form 26AS shows all TDS deducted against your PAN. Access via:
- Income Tax e-filing portal
- Net banking (most banks provide)
Step 2: Claim Credit in ITR
When filing ITR:
- Report FD interest as "Income from Other Sources"
- TDS from 26AS auto-populates
- Calculate tax liability
- TDS gets adjusted against tax payable
Step 3: Get Refund (If Applicable)
If TDS exceeds your tax liability:
- File ITR correctly
- Claim refund in ITR
- Refund processed to bank account (4-6 weeks usually)
Special Cases
Multiple FDs Across Banks
| Bank | FD Interest | TDS Threshold | TDS Deducted |
|---|---|---|---|
| SBI | ₹30,000 | ₹40,000 | ₹0 |
| HDFC | ₹35,000 | ₹40,000 | ₹0 |
| ICICI | ₹25,000 | ₹40,000 | ₹0 |
| Total | ₹90,000 | - | ₹0 |
Trap: No individual bank crosses ₹40,000, so no TDS. But total ₹90,000 is taxable. You must pay tax when filing ITR.
Corporate FDs (NBFCs)
| Difference | Bank FD | Corporate FD |
|---|---|---|
| TDS threshold | ₹40,000 | ₹5,000 |
| TDS rate | 10% | 10% |
| Safety | DICGC insured | Not insured |
Corporate FDs have much lower TDS threshold—₹5,000 vs ₹40,000.
NRI FD Taxation
| FD Type | TDS Rate | Form to Avoid |
|---|---|---|
| NRE FD | No TDS | Not needed (interest is tax-free) |
| NRO FD | 30% | Not applicable (TDS mandatory) |
NRIs cannot submit Form 15G/15H for NRO accounts.
Tax-Efficient FD Strategies
1. Split FDs Across Family Members
Instead of ₹10 L in your name:
- ₹3.33 L in your name
- ₹3.33 L in spouse's name
- ₹3.33 L in parent's name
Each person stays below ₹40,000 threshold.
Caution: Clubbing provisions apply for spouse/minor. Consult tax advisor.
2. Choose Senior Citizen FDs
If you're 60+:
- Higher interest rate (0.25-0.5% extra)
- Higher TDS threshold (₹50,000 vs ₹40,000)
- Form 15H easier eligibility
3. Consider Tax-Saver FD
5-year tax-saver FD gives Section 80C benefit:
- Lock-in: 5 years
- Deduction: Up to ₹1.5 lakh
- Interest: Still taxable
Effective return improves due to tax deduction on principal.
4. Time Your FDs
For cumulative FDs, timing matters:
- FD maturing in March: Full interest taxed in that year
- FD maturing in April: Interest spreads across years
FD vs Debt Mutual Fund: Tax Comparison
| Factor | FD | Debt Mutual Fund |
|---|---|---|
| Taxation | At slab rate | At slab rate (post 2023) |
| TDS | Yes (above ₹40K) | No TDS |
| Flexibility | Penalty on premature | No exit load (most liquid funds) |
| Returns | 6-7.5% | 6-8% |
Post-2023 debt fund changes, FD and debt funds have similar taxation. Choose based on liquidity needs.
Conclusion
Key takeaways for FD taxation:
| Your Situation | Action |
|---|---|
| Income below taxable limit | Submit Form 15G/15H |
| Senior citizen, low income | Submit Form 15H |
| High tax bracket | Plan for additional tax payment |
| Multiple banks | Track total interest across all |
| TDS already deducted, refund due | File ITR and claim refund |
Don't let TDS surprise you. Either prevent it with 15G/15H or plan for it in your tax calculations.
Calculate your FD returns: Use our FD Calculator to see maturity amount and plan for taxes.