Starting from 1st April 2026, banks and similar institutions will deduct TDS at 10% on Fixed Deposit interest under new Income Tax Section 393 replacing old Section 194A, only if total interest of the financial year per bank exceeds thresholds.
What is the TDS Threshold Limit?
| Category | Age | Threshold |
| For Non-Senior Citizens | Below 60 years | Rs.50,000 |
| For Senior Citizens | Above 60 years | Rs.1,00,000 |
If the interest is above threshold limits then TDS will be applicable on the entire interest, not just the excess.
For Example
For Non Senior
| Interest | TDS | Rate | TDS Amount |
| Rs.40,000 | No | Nil | 0 |
| Rs.80,000 | Yes | 10% | Rs.8000 |
For Senior
| Interest | TDS | Rate | TDS Amount |
| Rs.90,000 | No | Nil | 0 |
| Rs.1,10,000 | Yes | 10% | Rs.11,000 |
Note: If TDS is deducted, you can claim the same by filing Income Tax Return (ITR)
Strategy for Zero Tax and Zero TDS
For Zero Tax
FD interest is fully taxable as "income from other sources". But for resident individuals, under new tax regime, tax payable become zero if your total income including FD interest plus other income is below Rs.12 lakhs. As rebate under new Section 156 - allows up to Rs.60,000 off which helps to wipe out tax liability.
For Zero TDS
If your interest exceeds thresholds but your total income is still tax-free, you can submit new Form 121 (earlier which was 15G or 15H) to prevent TDS deduction altogether.
FD Strategy For 5 Year Without Paying Tax
Example for Senior
| Year | Interest Rate | FD Amount | FD Interest |
| 1st | 7.50% | 9,80,929 | 73570 |
| 2nd | 7.50% | 10,54,499 | 79087 |
| 3rd | 7.50% | 11,33,586 | 85019 |
| 4th | 7.50% | 12,18,605 | 91395 |
| 5th | 7.50% | 13,10,000 | 98250 |
To keep things simple, you can avoid both TDS and tax by following the two conditions.
First, don’t let your FD interest in any one bank cross the limit (Rs.50,000 for non-senior citizens and Rs.1,00,000 for senior citizens).
Second, make sure your total yearly income (including FD interest) stays within Rs.12 lakh, so you don’t have to pay any tax.
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