How To Calculate TDS on FD?

5 mins read
by Angel One
Worried about how much TDS you must pay on your FD earnings? Be better prepared when it comes to understanding TDS on FD by reading the following article!

Fixed Deposits (FDs) offer a safe haven for your savings, but there’s one aspect that can sometimes cause confusion: Tax Deducted at Source (TDS). This article will untangle the complexities of TDS on FD interest, helping you understand when and how much tax is deducted by your bank.

We’ll explore the current TDS threshold, the importance of your PAN card, and how senior citizens benefit. Feeling overwhelmed by potential calculations? Don’t worry, we’ll also introduce you to handy online TDS interest calculators that can simplify the process. Whether you’re a seasoned investor or just starting out, this guide will equip you with the knowledge to navigate TDS on FD interest and maximise your returns.

Also Read More About Types of TDS Deduction

TDS on FD Interest

Here’s a breakdown of the tax on FD interest that you earn:

  1. Tax Brackets: The interest earned on your FD is taxed according to your income tax slab.  For example, if your total annual income is ₹10 lakh and you fall under the 30% tax bracket, the tax on your ₹1 lakh FD interest would be ₹31,200 (considering the 30% tax rate and 0.4% cess).
  2. TDS on FD Interest: Banks deduct TDS (Tax Deducted at Source) on FD interest if it exceeds a certain threshold. For the financial year 2024-25 (AY 2024-25), the TDS threshold is ₹40,000 annually. This means if your total FD interest for the year is below ₹40,000, no TDS will be deducted.
  3. Importance of PAN Card:  Providing your PAN card to the bank ensures the correct TDS rate is applied. If you don’t submit your PAN, the TDS rate automatically jumps to 20%.
Interest Paid or Payable By                 Threshold Limit Nature of Interest
Payee is a Senior citizen Payee is any Other Person
Co-operative engaged in business 50,000 40,000 Interest on time deposits
Co-operative engaged in the banking business 50,000 40,000 Any other interest
Primary Agricultural Credit Society 50,000 40,000 Any interest 
Co-op. Land Mortgage Bank 50,000 40,000 Any interest 
Co-op. Land Development Bank 50,000 40,000 Any interest

Understanding TDS and Taxation on Different FD Types

Interest earned on Fixed Deposits (FDs) can be subject to tax depending on your residency status and the type of FD.

NRO (Non-Resident Ordinary) FDs: Interest on these FDs attracts a TDS rate of 30%.

NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) FDs: These FDs are tax-exempt, meaning no TDS is deducted.

Post Office FDs: Thankfully, no TDS is deducted on interest earned from FDs or Recurring Deposits (RDs) held with a post office.

Senior Citizen Benefits:  Indian senior citizens (aged 60 and above) enjoy a special tax exemption on FD interest. They can earn up to ₹50,000 annually in FD interest without any TDS deduction.

Ways to Reduce or Save Tax on Fixed Deposits

Here are a few key ways to reduce/save tax on FD interest or TDS on FD interest:

  1. Submitting Form 15G/15H: If your total annual income falls below ₹2.5 lakh, submit Form 15G (residents) or Form 15H (senior citizens) to your bank. This exempts TDS deduction as your income falls below the taxable limit.
  2. Considering Post Office FDs: Unlike banks, post office FDs don’t have TDS deducted on the interest earned. This can be a simpler option if your primary concern is avoiding TDS.
  3. Understanding Tax Implications (Consult a Tax Advisor): While splitting FD investments among family members can bring individual interest income below the ₹10,000 threshold for TDS deduction, be aware of “clubbing provisions” in the Income Tax Act. These provisions might combine your income with that of your spouse or minor children for tax purposes. Consulting a tax advisor is crucial before employing this strategy.
  4. Spreading Your FDs Across Banks: Dividing your FD investment across multiple banks can potentially help you avoid TDS. If the interest earned from each individual FD remains below ₹10,000, the banks won’t deduct TDS. However, ensure you consider the overall interest rates offered by different banks when making this decision.
  5. Strategic FD Timing:  Consider the timing of your FD investment. Placing an FD closer to the financial year’s end might distribute the interest income across two tax years. This could potentially lower the interest amount for a particular year below the ₹10,000 threshold, thereby avoiding TDS. Remember, consult a tax advisor for personalised advice based on your specific situation.

Points to Know About TDS on Fixed Deposit 

Here’s a breakdown of key points to remember about TDS (Tax Deducted at Source) on your FDs:

  1. TDS Refunds: If the TDS deducted by the bank is higher than your tax liability, you can claim a refund during your income tax filing.
  2. Tax Liability: If your income falls under the higher tax brackets (20% or 30%), you might need to pay additional tax beyond the deducted TDS. This is done during self-assessment tax filing.
  3. Timing of TDS Calculation: Banks deduct TDS on the interest earned on your FD, not necessarily when the FD matures. This means you may have to pay tax annually on the interest income, even if the FD itself matures later.

Also Read More About How to File TDS Return?


Understanding the intricacies of TDS on FD interest is crucial for efficiently managing your fixed deposits and optimising returns. By leveraging options like submitting Form 15G/15H, considering post office FDs, consulting tax advisors, spreading FDs across banks, and strategically timing your FDs, you can reduce or avoid unnecessary TDS deductions and potentially enhance your income. 

Remember, though regular FDs are not tax-deductible, investing in tax-saving schemes like ELSS funds can offer significant tax benefits. Consider investing in ELSS funds to save on taxes while aiming for higher returns. This smart move not only helps in tax saving under Section 80C but also contributes to your long-term wealth creation. Open your Demat account with Angel One today and start investing in ELSS funds.


How can I avoid TDS on FD interest if my income is low?

If your total income falls below the taxable limit for the year, you can prevent TDS deduction on your FD interest. To do this, submit Form 15G (for regular taxpayers) or Form 15H (for senior citizens) to your bank. These forms declare your low-income status and exempt you from TDS.

Can I deduct FD interest income from my taxes?

Unfortunately, the Income Tax Act doesn’t offer a direct deduction for regular fixed deposit interest. However, there are tax-saving FD schemes available. These schemes lock your investment for a specific period but offer tax benefits under Section 80C of the Income Tax Act. You can potentially claim deductions of up to ₹1.5 lakh per year on your taxable income by investing in these schemes.

Are there any ways to save tax through fixed deposits?

While regular FDs don’t offer direct tax deductions on interest income, consider exploring tax-saving FD schemes. These specialized FDs come with a lock-in period but allow you to potentially reduce your taxable income by claiming deductions under Section 80C. Additionally, senior citizens benefit from a higher tax exemption threshold on regular FD interest income.

Is the TDS rate on FD interest fixed, or can it change?

The TDS rate on FD interest is determined by the Indian government and can be subject to change based on budgetary needs or policy revisions. While the current rate for resident individuals is 10% (if interest exceeds Rs. 40,000 per year), it’s advisable to stay updated on any potential changes announced in the annual budget or official government notifications.