Fixed Deposits (FDs) are one of the most preferred investment options in India for their safety and assured returns. However, many investors forget that the interest earned on FDs is fully taxable.
How is FD Interest Taxed?
- Taxable under "Income from Other Sources" in Income Tax Return (ITR).
- Added to the total income and taxed as per the applicable income tax slab.
- No special exemption is available for FD interest except for Section 80TTB (senior citizens) up to ₹50,000 only in the old regime.
TDS on FD Interest
Banks deduct TDS @10% if the interest in a financial year exceeds ₹40,000 (₹50,000 for senior citizens).If PAN is not furnished, TDS will be 20%.
The TDS deduction can be avoided by submitting Form 15G/15H (if your total income is below taxable limit).
How to Calculate FD Interest Tax?
Add up all FD interest earned in the financial year (check bank statements or Form 26AS/Annual Information Statement).
Include it in "Income from Other Sources" in your ITR.
Apply the income tax slab rate to determine the tax payable.
Adjust for TDS already deducted by the bank.
Example:
If you earned ₹60,000 FD interest and fall in the 20% slab:
- Tax on interest = ₹60,000 × 20% = ₹12,000 + cess.
- If the bank has deducted ₹6,000 as TDS, you need to pay the balance ₹6,000 at filing time.
How to Pay Tax on FD Interest?
- If TDS deducted is less than your actual tax liability, pay the balance as Self-Assessment Tax before filing your ITR.
- Use the Challan 280 on the Income Tax e-filing portal to pay tax online.
Key Takeaway
| Particulars | Details |
| Tax Head | Income from Other Sources |
| Tax Rate | As per individual's income tax slab |
| TDS Deduction Rate | 10% (20% if PAN not provided) |
| TDS Threshold | ₹40,000 per year (₹50,000 for senior citizens) |
| Exemption for Senior Citizens | Up to ₹50,000 under Section 80TTB |
| TDS Avoidance | Submit Form 15G (non-senior) / Form 15H (senior) if income below taxable limit |
| When Taxable | On accrual each year, not just on maturity |
| Where to Declare in ITR | Schedule OS - "Income from Other Sources" |
| How to Pay Additional Tax | Through Challan 280 on Income Tax e-filing portal |
FAQs
Is FD interest taxable every year or only on maturity?
FD interest is taxable every year, even if you withdraw it on maturity. The tax is based on accrual, not just receipt.
How can I avoid TDS on FD interest?
Submit Form 15G (for non-senior citizens) or Form 15H (for senior citizens) if your total income is below the taxable limit.
Do I need to declare FD interest if bank has already deducted TDS? Yes, you must declare the total interest in your ITR and adjust the TDS against your total tax liability.
Is there any exemption for FD interest? No general exemption, but senior citizens can claim up to ₹50,000 under Section 80TTB in the old regime.
How do I find my total FD interest for tax calculation?
Check your bank's interest certificate, Form 26AS, or Annual Information Statement (AIS) on the Income Tax portal.
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