TDS on Fixed Deposits in India: Rules, Tips

Fixed Deposits (FDs) are one of the most popular and trusted investment instruments in India. They offer stable returns, minimal risk, and flexible tenure options. But what many investors overlook is the Tax Deducted at Source (TDS) that comes into play when your FD interest crosses a certain limit.

Let’s break it down and explore how you can manage and minimize TDS on your Fixed Deposits.

What is TDS on Fixed Deposit?

TDS stands for Tax Deducted at Source. It is the tax your bank deducts before crediting interest from your Fixed Deposit to your account. This deduction is then deposited with the Income Tax Department on your behalf.

TDS is applicable if  interest earned in a financial year exceeds ₹50,000 (₹1,00,000 for senior citizens).

So, if your total FD interest from a particular bank stays below ₹50,000 in a year, no TDS will be deducted.

What are the Rules and Regulations of TDS on FDs?

Here’s what you need to know:

• TDS Rate: 10% if PAN is submitted; 20% if PAN is not linked or submitted.
• Threshold Limit: ₹50,000 for regular customers and ₹1,00,000 for senior citizens (per bank, per financial year).
• Applicability: TDS is deducted on accrued interest, not just the interest paid. So even if you don’t withdraw your interest, tax may still be deducted.
• Declaration Forms: To avoid TDS, eligible individuals can submit Form 15G (for regular individuals) or Form 15H (for senior citizens).

Tips to Save TDS on Fixed Deposits

While you can’t escape paying tax on interest income if your total income exceeds the basic exemption limit, you can avoid upfront TDS deduction with a few smart strategies.

1- Time your investments:

Something to know about FDs is that if you invest in fixed deposit in October and financial year ends in March, then your interest will be divided in two years.

2- Split the fixed deposit:

An individual can have a FD on his/her personal account and another under HUF (joint account). Both these deposits are considered different.

3- Submit Form 15H/15G:

If you declare that you do not have any income that can be taxed with a Form 15G, then banks do not cut TDS on your deposits. Senior citizens can fill the Form 15H.

So, what are you waiting for? Go with any of these tips to save TDS on your fixed deposits! Kyonki FD sahi hai, tax ki tension nahi hai.

Know more about how does bank calculate interest on FD(Fixed Deposits)