TDS on Interest on Fixed deposit – all you want to know

People often asks, is interest on FD taxable? What is the exemption limit of TDS on interest? How TDS on fixed deposit is calculated? In this article, we have discussed TDS provisions on interest on fixed deposits and provided answer to all of your questions. You can use our comment section below this article to ask us questions.

Interest on fixed deposit is chargeable to tax under the head “income from other sources”. However, amount invested on a fixed deposit for a tenure of 5 years is eligible for tax deduction under section 80C. To know more, you can refer article on tax deduction on fixed deposit.

TDS on interest on fixed deposit

If interest on Fixed Deposits exceeds Rs 10,000 in a financial year, it would be eligible for tax deduction at source (TDS) at the rate of 10%.

However, if bank does not have your PAN details then tax will be deducted at the rate of 20% (section 206AA) instead of 10% from your interest on fixed deposits.

How is TDS on Fixed Deposit calculated?

Please note, Limit of Rs 10,000 is per bank per individual.

If you have fixed deposit with more than one bank and all of them are earning interest amount of more than Rs 10,000 but none of a single bank is paying interest of more than Rs 10,000, then tax will not be deducted from your interest on Fixed Deposits.

However, in case interest is received from different branches of the same bank, TDS provisions will be applicable, if total interest on fixed deposits exceeds Rs 10,000 per year.

For instance, if interest on fixed deposit is Rs 20,000 for the financial year 2018-2019, TDS @10% has to be deducted as the amount exceeds Rs 10,000 limit. In this case, TDS amount of Rs 2,000 (i.e. 10% on Rs 20,000) has to be deducted. Balance Rs 18,000 has to be paid to the customer.

If an investor is not liable to tax, then he can submit form 15G/15H stating that his income is not taxable for the financial year. Based on this form, bank should not deduct tax on interest on fixed deposits. Form 15H is applicable to senior citizen (Indian resident aged 60 years or above), others can use form 15G.

Validity of form 15G/15H is only for a financial year. Assessee is required to submit these forms every year to claim nil or lower deduction of TDS on interest on fixed deposits. To know more read our article on form 15H and 15G.

Budget 2018 has increased non-deduction of TDS limit in case of senior citizen from Rs 10,000 to Rs 50000.

Another thing to be kept in mind is that the bank deducts tax on interest on fixed deposit when interest amount accrue not when it’s paid or FD matures.

For instance, if you have a 3 years FD in state bank of India, then SBI will be deducting tax on interest amount when it exceeds Rs 10,000 per year irrespective of whether FD matures or not. Every year tax will be deducted and at the end of 3rd year, you will be getting your principal amount invested plus balance interest amount earned net of TDS.

How to find TDS details

Bank has to issue TDS certificate in form 16A based on the number of quarters in which tax has been deducted. Such certificate will be available at trace portal after filing TDS returns by the bank with the department.

Form 16A will have all the details including, tax deducted, interest paid, bank PAN, address and TAN etc.

If you didn’t get these certificates, you can trace out your TDS details in form 26AS available at income tax site. You can download or view form 26AS from Income tax e-filing portal with your login ID and password. The Form 26AS will include record of all the TDS payments deducted on your Fixed Deposits.

If bank has deducted higher tax at the rate of 20% for not having customer’s PAN with them, then such thing can be rectified by the bank by filing revised TDS return. For this, you need to provide your PAN details to the bank. After filing revised return, you can see the TDS amount in your form 26AS at income tax e-filing portal.

If you are not liable to income tax but bank has already deducted TDS on interest income earned on fixed deposits, then refund can be claimed by filing your tax return with tax department.

While filing your tax return you need to consider total interest earned on fixed deposits irrespective of whether TDS has been deducted or not.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.