With the month of tax filing approaching, this question is becoming common: Is tax applicable on FD? In India, yes, fixed deposit (FD) interest is taxable, even though banks deduct tax at source (TDS) you’re responsible for paying the full tax liability based on your income slab.
How Much Tax is Applicable on FD Interest?
FD interest is treated as ”Income from Other Sources” and taxed according to your income bracket, usually between 5 to 30%, plus cess.
However, banks deduct TDS at 10% (or 20% if you don’t provide PAN) under Section 194A once your FD interest crosses Rs. 10,000 in a financial year (Rs. 50,000 for senior citizens).
This TDS is a prepayment, not the actual tax liability; you must report the full interest income in your ITR and calculate tax accordingly. If your slab rate is higher, you'll owe the difference; if lower, you'll get a refund.
To avoid unnecessary TDS deductions, submit Form 15G (under 60) or 15H (60+) to your bank when interest is below the tax-exemption threshold and your total income is below the taxable limit.
Additionally, you can split FDs across banks or stagger them so that interest in any single financial year remains under Rs. 40,000 (Rs. 50,000 for seniors), thereby avoiding TDS.
You’ll receive a Form 16A or 26AS reflecting TDS deducted. Use this to reconcile in your ITR; any excess TDS can be claimed as a refund, while any shortfall must be paid with your return.
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Is Tax Applicable On FD?
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2025-06-19T14:45:31+00:00 2025-06-19T14:45:32+00:00Comment
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