Taxability of Fixed Deposit Interest

Taxability of FD Interest: Interest income earned through FD is fully taxable under income from other sources

TDS Threshold Limits on FD Interest (New Rules from April 1, 2025):

Category	Previous Threshold	New Threshold (w.e.f. April 1, 2025)
Normal Citizens (below 60 years)	₹40,000 per annum per bank	₹50,000 per annum per bank
Senior Citizens (60 years or above)	₹50,000 per annum per bank	₹1,00,000 per annum per bank

TDS Rate: 10% on the entire interest amount if it exceeds the threshold

Legal Methods to Save TDS on FD

Method 1: Multiple FDs Across Different Banks:

Strategy	Example	Benefits
Split large FD amount into smaller FDs across different banks	Instead of one ₹15 Lakh FD, create three ₹5 Lakh FDs in three different banks	• Interest per bank stays below TDS threshold • Avoids SFT reporting (limit: ₹10 Lakh per bank) • Maximizes DICGC cover (₹5 Lakh per depositor, per bank) • Allows taking advantage of different interest rates

Form	Applicable For	Conditions	Important Notes
Form 15G	Resident Individuals below 60 years	• Must be a Resident of India • Final estimated tax on total income must be NIL • Total interest income must be less than Basic Exemption Limit (₹2.5 Lakh for Old Regime, ₹4 Lakh for New Regime)	• Submit annually at the beginning of FY • False declaration punishable under Section 277 with potential imprisonment (min. 3 months)
Form 15H	Resident Senior Citizens (60 years or above)	• Must be a Resident of India • Final estimated tax on total income must be NIL	• Submit annually at the beginning of FY • False declaration punishable under Section 277 with potential imprisonment (min. 3 months)

Method 3: TDS Refund:

Situation	Remedy
TDS already deducted	File Income Tax Return (ITR) to claim refund if eligible based on final tax liability

Late Submission of Form 15G/15H

Timing	Impact
After April (mid-year)	• Prevents TDS on future interest payments within that FY • Already deducted TDS can only be claimed through ITR filing

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