The new financial year 2025-26 has started today and with the beginning of the month, many important rules have changed. In this episode, there is big relief news for the people investing in Fixed Deposit (FD). Actually, in the budget for the financial year 2025-26, Finance Minister Nirmala Sitharaman had announced to increase in the limit of TDS (tax deduction at source) on interest received on FD.

The main objective of this change is to free small investors and senior citizens from the burden of tax deductions. This change will prove to be very beneficial for the general public, because increasing the limit of TDS will leave a little more money in the hands of the people. So let’s know in detail about the new rules of TDS on FD.

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What is TDS

Tax Deducted at Source (TDS) is a tax collection system in which the government deducts tax directly from the source of income. TDS applies to many types of income, such as salary, interest on fixed deposits, rent, etc. This tax is deducted as per the prescribed rates and deposited with the government. The main purpose of TDS is to prevent tax evasion and ensure revenue collection for the government.

TDS on Fixed Deposit

TDS on fixed deposits is the tax that the bank deducts from the investor’s interest and deposits with the government. When the interest earned on FD in the bank exceeds a certain limit, the bank must deduct TDS. This limit is set differently for senior citizens and non-senior citizens, as mentioned in the table above. After deducting TDS, the bank issues a TDS certificate to the investor, which the investor can use while filing income tax returns.

New limit of TDS for common citizens and senior citizens

The government has increased the limit of TDS on interest income on FD for common citizens from ₹ 40,000 to ₹ 50,000. At the same time, the limit of TDS deduction for senior citizens has been doubled. Earlier it was ₹ 50,000, which has now become ₹ 1 lakh. This simply means that if your interest income from FD is less than this new limit, then no TDS will be deducted from you. This change is especially beneficial for senior citizens, whose TDS exemption limit has been increased drastically.

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