1. FD Interest: Simple but Widely Misunderstood
Fixed Deposit (FD) interest is one of the most common income items for Indian taxpayers — yet it is also one of the most commonly misreported. The key misconceptions: that TDS deducted by the bank is the final tax; that only interest above Rs 40,000 is taxable; that you report only the interest from one bank. Under ITA 2025, ALL FD interest from ALL banks combined is taxable at your full slab rate — TDS is only a credit against total tax.
2. How FD Interest Is Taxed
- Taxable as income from other sources at slab rate in the year it accrues (not year of maturity)
- For cumulative FDs: interest accrues each year even if not paid — report annually, not only at maturity
- For non-cumulative (quarterly/monthly payout) FDs: interest is taxable in the year it is received/credited
- All banks combined: add interest from SBI, HDFC, ICICI, Axis, post office FD — all in one Schedule OS entry
3. TDS by Bank: How It Works
| Annual FD Interest from ONE Bank | TDS Rate |
|---|---|
| Up to Rs 40,000 (Rs 50,000 for seniors) | No TDS |
| Above Rs 40,000 (Rs 50,000 for seniors) | 10% on entire interest |
| If PAN not furnished | 20% on entire interest |
Important: the TDS threshold is per bank — so if you have FDs in 5 banks each earning Rs 35,000 interest, NO TDS is deducted by any bank. But total interest is Rs 1,75,000 — fully taxable at slab rate. The entire Rs 1.75L must be reported in ITR even though no TDS was deducted.
4. Cumulative FD: Annual Accrual Reporting
For cumulative FDs (where interest is reinvested and paid only at maturity), interest must be reported on an annual accrual basis — not just at maturity. The bank TDS certificate (Form 16A) shows the interest accrued each year. Always obtain Form 16A from the bank for each financial year. Alternatively, check AIS — it shows interest data per bank per year.
5. How to Avoid TDS: Form 15G and 15H
If your total income is below the taxable threshold:
- Form 15G: For residents below 60 years whose total income for the year will be below the taxable limit — submit to the bank at the start of each financial year (April)
- Form 15H: For senior citizens (60+) whose total income will not exceed the taxable limit
- Both are valid for ONE financial year — must be submitted fresh every April
- False declaration: attracts penalty under ITA 2025
- If you already have significant income from other sources, do not submit 15G/15H — it is a self-certification
6. Senior Citizen Savings Scheme (SCSS)
SCSS interest is taxable at slab rate. The post office/authorised bank deducts TDS at 10% when annual SCSS interest exceeds Rs 50,000. For senior citizens, the Section 80TTB equivalent allows Rs 50,000 deduction on ALL interest combined — reducing or eliminating tax on SCSS interest for those in lower brackets.
7. AIS and FD Interest
AIS now captures FD interest data directly from banks. The IT Department compares AIS interest data with ITR Schedule OS. If your ITR shows lower interest than AIS, an automated notice is generated. Always download AIS before filing ITR and reconcile FD interest from all banks. Use AIS data to ensure all interest is reported — not just the banks you remember.
8. Senior Citizen Deduction Under Old Regime
Senior citizens (60+) get a Rs 50,000 deduction under the Section 80TTB equivalent of ITA 2025 (old regime) on all interest — FD, savings, recurring, SCSS, post office deposits combined. This deduction can effectively shelter most or all interest income from tax for modest-income seniors. Example: Rs 40,000 SCSS interest + Rs 20,000 SBI FD interest = Rs 60,000 total; deduction Rs 50,000; taxable = Rs 10,000 (negligible tax).
9. Why TaxClue
Complete and accurate FD interest reporting across all banks — reconciled with AIS — is essential to avoid notices. TaxClue reconciles AIS interest data and ensures no bank or SCSS interest is missed. Contact us for ITR filing under ITA 2025.