Fixed Deposit (FD): Investors in fixed deposits will now benefit from updated tax deduction at source (TDS) regulations that have taken effect today. The TDS exemption threshold for interest earned on fixed deposits has been raised for investors. Previously, TDS was applied to interest exceeding Rs 40,000 (or Rs 50,000 for senior citizens).
TDS exemption on fixed deposit interest has been raised from Rs 40,000 to Rs 50,000
However, the Union Budget 2025 has increased this exemption limit. For individual investors, the TDS exemption on fixed deposit interest has been raised from Rs 40,000 to Rs 50,000, while for senior citizens, it has been increased from Rs 50,000 to Rs 1,00,000.
Banks apply a flat TDS rate of 10 percent on interest above Rs 50,000
It is important to note that TDS is not deducted from the principal amount of the fixed deposit, regardless of its size. Nevertheless, if an individual earns interest exceeding Rs 50,000 on their fixed deposit, that interest will be subject to TDS. Banks apply a flat TDS rate of 10 percent on interest above Rs 50,000 (or Rs 1 lakh for senior citizens) provided the investor submits their PAN card details. If no PAN card details are provided, the TDS rate on interest income rises to 20 percent. In the case of joint fixed deposits, TDS is deducted under the name of the primary account holder.
TDS amount will be included in the individual’s total income
Additionally, tax-saving fixed deposit investments, typically made for a duration of 5 years, are eligible for tax deductions in accordance with the regulations. The TDS amount will be included in the individual’s total income, and if this total remains below the taxable threshold, the deducted TDS can be claimed back. Furthermore, the increased TDS exemption limit also applies to income generated from investments in sovereign gold bond schemes (SGB).