Interest from FDs, RDs and savings accounts is fully taxable under "Income from Other Sources" and added to your income at your slab rate — there is no special flat rate. Banks deduct TDS at 10% under Section 194A once FD/RD interest crosses ₹50,000 a year (₹1,00,000 for senior citizens). PPF, Sukanya Samriddhi, NRE/FCNR and tax-free bond interest are fully exempt.
Taxability of Common Interest Income
How every common source of interest is treated for FY 2025-26 — whether it is taxable, whether TDS applies, and the key provision.
| Interest Source | Taxable? | TDS | Key Provision |
|---|---|---|---|
| Fixed Deposit (FD) | Slab rate | 10% above ₹50K | Sec 194A |
| Recurring Deposit (RD) | Slab rate | 10% above ₹50K | Sec 194A |
| Savings account | Slab rate | No TDS | 80TTA ₹10K / 80TTB ₹50K |
| Post office / co-op deposits | Slab rate | Varies | Sec 194A |
| NSC | Slab rate | No TDS | Accrual · 80C on reinvested int. |
| NRO account / FD | Slab rate | 30%+ (Sec 195) | Non-resident |
| NRE / FCNR account | Exempt | No TDS | Sec 10(4)(ii) |
| PPF | Exempt | No TDS | Sec 10(11) |
| Sukanya Samriddhi | Exempt | No TDS | Sec 10(11A) |
| Tax-free bonds (REC/NHAI) | Exempt | No TDS | Sec 10(15) |
| EPF / PF interest | Largely exempt | Conditional | Sec 10(11)/(12) |
| P2P lending / corporate bonds | Slab rate | 10% (Sec 194A/193) | Schedule OS |
"Slab rate" means the interest is added to total income and taxed at your applicable slab. Verify the latest limits on incometax.gov.in before filing.
The 10% TDS a bank deducts on FD interest is only a prepayment. If your slab rate is higher (20%/25%/30%), you must pay the difference as advance or self-assessment tax; if you fall below the taxable limit, the TDS is refunded when you file your ITR. Always report the gross interest, not the amount received after TDS.
Section 80TTA vs 80TTB
Two deductions reduce tax on interest — but only under the old regime. Under the new regime (the default from AY 2024-25), neither 80TTA nor 80TTB is available.
| Section | Who Can Claim | Limit | Covers FD/RD? |
|---|---|---|---|
| 80TTA | Individuals below 60 & HUF | ₹10,000 | Savings only |
| 80TTB | Senior citizens (60+) | ₹50,000 | All deposit interest |
80TTB replaces 80TTA for seniors — you cannot claim both. Available in the old regime only.
Old regime — deductions allowed
- 80TTA ₹10,000 on savings interest
- 80TTB ₹50,000 for seniors (all interest)
- 80C, 80D and Chapter VI-A available
- Basic exemption ₹2.5L / ₹3L / ₹5L (age-based)
New regime — default, no interest deduction
- No 80TTA / 80TTB on interest
- Slabs: nil to ₹4L, then 5%–30%
- 87A rebate → nil tax up to ₹12L income
- Standard deduction ₹75,000 (salary/pension only)
Retirees living on FD interest often benefit from the old regime because of the ₹50,000 80TTB deduction plus the higher age-based exemption. But the new regime's ₹12L rebate can still win where total income is modest. Run both before deciding.
Not sure which regime saves you more on your interest income?
Old vs New Calculator →TDS on FD Interest & Form 15G / 15H
A bank deducts 10% TDS under Section 194A when your interest from that bank (across all branches) exceeds ₹50,000 in a financial year — ₹1,00,000 for senior citizens (limits raised by Budget 2025). If you have not linked a valid PAN, TDS is deducted at 20%.
- If your total income is below the basic exemption limit, submit Form 15G (below 60) or Form 15H (senior citizens) so the bank does not deduct TDS.
- A false 15G/15H declaration when your income is actually taxable attracts penalty — file it only if you genuinely expect nil tax.
- TDS deducted still shows in your Form 26AS / AIS; claim it in Schedule TDS of your ITR.
The ₹50,000 threshold is per bank, aggregated across all its branches via PAN. Spreading one large deposit across branches of the same bank will not avoid TDS, and the interest remains fully taxable regardless of whether TDS was deducted.
How Interest Adds to Your Tax
Take a 65-year-old with ₹80,000 FD interest and ₹12,000 savings interest in FY 2025-26, choosing the old regime:
Senior · old regime (80TTB)
Below-60 · old regime (80TTA)
The taxable interest is then added to other income and taxed at the applicable slab. Use the income tax calculator to see the tax on your full income.
How to Report Interest Income in Your ITR
- Report gross interest in Schedule OS (Other Sources)
- Reconcile with AIS / Form 26AS
- Claim TDS credit in Schedule TDS
- Claim 80TTA / 80TTB (old regime only)
- Disclose NSC interest on accrual each year
- Show exempt PPF/NRE interest in Schedule EI
- Pay any shortfall as self-assessment tax
Non-disclosure of interest — even where TDS was fully deducted — can trigger a mismatch notice under the annual information system and penalty under Section 270A. Every rupee in your AIS should tie to your return.
The most common ITR mistake we fix is reporting only the interest a bank paid out and ignoring accrued FD/NSC interest or interest on which TDS was already deducted. Reconciling your AIS line-by-line before filing avoids notices later.
Frequently Asked Questions
Related TaxClue services
Interest Income to Report? File It Right.
From FD and savings interest to NSC accrual and refund interest, TaxClue's CA-led team reconciles your AIS, claims every TDS credit and picks the regime that costs you least — 100% online, across India.