Tax Deducted at Source (TDS) on fixed deposits is the tax deducted by banks or financial institutions on the interest earned if it exceeds a certain limit in a financial year.

For individuals below 60 years of age, TDS is applicable when the annual interest income exceeds Rs 40,000. For senior citizens, the limit is Rs 50,000. The standard TDS rate is 10 per cent, but if the depositor has not provided their Permanent Account Number (PAN), the rate increases to 20 per cent.

To avoid TDS, individuals can submit Form 15G (for those with no taxable income) or Form 15H (for senior citizens). These forms declare that the individual’s total income is below the taxable limit. Even if TDS is deducted, depositors must report their total FD interest in their Income Tax Return (ITR) to ensure compliance and adjust their tax liabilities. While TDS simplifies tax collection, it also helps individuals manage their taxes efficiently.

How is TDS Calculated on Fixed Deposits?

The interest earned from fixed deposits (FDs) is fully taxable. It is added to your total income and taxed based on your applicable tax slab. Since FD interest is considered “Income from Other Sources,” banks deduct Tax Deducted at Source (TDS) when crediting the interest to your account.

How to Avoid TDS Deduction on FD Interest?

To prevent TDS deduction, you can submit Form 15G (for individuals below 60 years) or Form 15H (for senior citizens) to your bank. These forms serve as self-declarations stating that your total income is below the taxable limit. By submitting these forms, you ensure that TDS is not deducted, allowing you to receive the full FD interest amount, provided your income remains within the exemption limit.