How fixed deposit interest is taxed
Updated 11 October 2026
Interest on a fixed deposit is added to your income and taxed at your normal slab rate, under the head "income from other sources". Banks deduct TDS at 10% once your interest from that bank crosses ₹50,000 in a year (₹1 lakh for senior citizens), but that TDS is only an advance: you may owe more, or get some back, when you file your return.
How FD interest is taxed
There is no special rate for FD interest. It is added to your salary, pension and other income, and the total is taxed through the slabs of the regime you choose. So the tax on your interest depends on your slab: nothing if your total income stays within the rebate limit, and up to 30% plus cess at the top. See income tax slabs.
The same treatment applies to recurring deposits, post office time deposits, Senior Citizens' Savings Scheme interest and company deposits.
Cumulative deposits. In a cumulative FD the interest is paid out at maturity, but it is earned every year. Banks deduct TDS and report the interest every year as it accrues, and it appears in your Annual Information Statement (AIS). The simplest course is to declare it each year as it accrues, matching the AIS, rather than all at once at maturity. See Form 26AS and AIS.
TDS on FD interest
TDS on interest was section 194A of the 1961 Act; under the 2025 Act it is part of section 393, which brings most TDS rules together. The limits have been the same since 1 April 2025:
| Depositor | TDS starts when interest in the year exceeds | Rate |
|---|---|---|
| Below 60, with a bank, co-operative bank or post office | ₹50,000 | 10% |
| Senior citizen (60 or above), same deposits | ₹1,00,000 | 10% |
| Deposits with others, such as companies | ₹10,000 | 10% |
| Depositor who has not given a PAN | Same limits | 20% |
The limit is per bank: it adds up all your deposits across its branches, not each FD separately. Once interest crosses the limit, TDS applies to the whole amount. The TDS appears in your AIS and is credited against your final tax. See TDS vs TCS.
Form 121: stopping TDS when you owe no tax
From 1 April 2026, Form 15G (for people below 60) and Form 15H (for senior citizens) have been replaced by one form, Form 121, under the Income-tax Rules, 2026. A resident individual or HUF whose tax for the year will be nil can give it to each bank at the start of the year, and the bank will not deduct TDS. Old 15G and 15H forms do not carry over, so submit a fresh Form 121 every year. Do not give it if you will owe tax: a false declaration is an offence, and the tax is due anyway.
Deductions on interest
- Senior citizens, old regime: up to ₹50,000 a year of interest on bank, co-operative bank and post office deposits, including FDs, is deductible (section 80TTB, now section 153 of the 2025 Act).
- Others, old regime: the ₹10,000 deduction under section 80TTA (also now section 153) covers savings account interest only, not FDs.
- New regime: neither deduction is allowed, but the rebate makes total income up to ₹12 lakh tax-free, which covers many people with modest interest income.
- Tax-saving FD: a five-year tax-saving FD counts for section 80C in the old regime, but its interest is taxable like any other FD.
TDS by the bank: 10% of ₹80,000 = ₹8,000, since her interest is above ₹50,000.
Her total income: ₹14,00,000 − ₹75,000 standard deduction + ₹80,000 = ₹14,05,000. All of the interest falls in the 15% slab (₹12 lakh to ₹16 lakh).
Tax on the interest: 15% of ₹80,000 = ₹12,000, plus 4% cess = ₹12,480.
She has already paid ₹8,000 through TDS, so she owes ₹4,480 more when she files. If she left the interest out, the mismatch with her AIS could bring a notice.
Ways to keep the tax down
- Deposits in the name of a parent or an adult child with a lower income are taxed in their hands, even if you gave them the money, because gifts to them are not clubbed with your income. Interest on money you gift to your spouse, however, is added back to your income (see tax on gifts).
- If your income is close to the ₹12 lakh rebate limit, extra interest can be costly. Compare both regimes in the income tax calculator.
- Senior citizens in the old regime should claim the ₹50,000 under 80TTB; see income tax for senior citizens.