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Guide · Income Tax

Income Tax on Interest Income — FD, Savings, PPF & More

How FD, RD, savings, NSC, PPF, NRE and bond interest is taxed for FY 2025-26 — TDS under Section 194A, the 80TTA/80TTB deductions, exemptions and how to report it in your ITR.

Written by: TaxClue Editorial Desk
Updated: 18 August 2026
Reading time: 5 min
Questions: 16 answered

Updated for AY 2026-27
CA Reviewed
FD · Savings · PPF · NRE

Quick Answer

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.

At a glance

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.

TDS is not the final tax

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.

Savings-interest relief

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

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

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)

Which regime for interest-heavy income?

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 →

Section 194A

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%.

1YouEarn FD / RD interest
2BankDeducts 10% TDS above ₹50K
3Form 26ASTDS credit reflected
4ITRClaim credit / get refund

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.

Split FDs don't escape TDS anymore

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.

Worked example

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)

FD interest₹80,000

Savings interest₹12,000

Gross interest₹92,000

Less: 80TTB−₹50,000

Taxable interest₹42,000

Below-60 · old regime (80TTA)

FD interest₹80,000

Savings interest₹12,000

Gross interest₹92,000

Less: 80TTA (savings only)−₹10,000

Taxable interest₹82,000

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.

Filing

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.

TaxClue Insight

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.

Sources

Slabs, 194A limits & forms: incometax.gov.in
Budget 2025 TDS limit (₹50K / ₹1L u/s 194A) & new-regime slabs (AY 2026-27)
Deductions: Section 80TTA / 80TTB (old regime); Section 87A rebate
Exemptions: Section 10(11), 10(11A), 10(15), 10(4)(ii)

Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.

Questions, answered

Short, direct answers to the 16 questions readers ask most on this topic.

Yes. Interest on a Fixed Deposit is 100% taxable under "Income from Other Sources" with no special flat rate — it is added to your total income and taxed at your applicable slab. Banks deduct TDS at 10% under Section 194A once FD interest from that bank exceeds ₹50,000 in a financial year (₹1,00,000 for senior citizens, following Budget 2025). TDS is only a prepayment; if your slab is higher you pay the balance, and if your income is below the taxable limit the TDS is refunded when you file your ITR.

10% under Section 194A if you have furnished a valid PAN, deducted once your interest from that bank crosses ₹50,000 a year (₹1,00,000 for senior citizens). Without a valid PAN the rate is 20%. TDS is deducted on the interest credited/paid and reflected in your Form 26AS and AIS.

Yes. RD interest is fully taxable at slab rates under "Income from Other Sources," exactly like FD interest, and is covered by the same Section 194A TDS rules and the ₹50,000 / ₹1,00,000 thresholds. There is no 80TTA relief on RD interest (savings accounts only); seniors can cover it under 80TTB.

If your total income is below the basic exemption limit, submit Form 15G (below 60) or Form 15H (senior citizens) to your bank at the start of the financial year so no TDS is deducted. You cannot legally avoid the tax itself — only the deduction at source — and a false declaration attracts penalty. If TDS is deducted but you owe no tax, claim a refund by filing your ITR.

Yes, savings bank, co-operative bank and post office savings interest is taxable under "Income from Other Sources." However, under the old regime, individuals below 60 can deduct up to ₹10,000 under Section 80TTA, and senior citizens can deduct up to ₹50,000 on all interest under Section 80TTB. No TDS is deducted on savings account interest.

80TTA gives individuals below 60 (and HUFs) a deduction up to ₹10,000 on savings account interest only. 80TTB is for senior citizens (60+) and is far wider: up to ₹50,000 on all interest — savings, FD and RD. A senior claims 80TTB instead of 80TTA, not both. Both are available only under the old tax regime.

No. Under the new regime (the default from AY 2024-25), neither 80TTA nor 80TTB applies — all interest is taxed without these deductions. To claim them you must opt for the old regime. Interest-heavy retirees should compare both regimes, since 80TTB plus the higher age-based exemption often makes the old regime cheaper.

PPF interest is exempt under Section 10(11) with no upper limit; Sukanya Samriddhi interest under Section 10(11A); NRE and FCNR account interest for non-residents under Section 10(4)(ii); interest on notified tax-free bonds (REC, NHAI, IRFC, HUDCO) under Section 10(15). EPF interest is largely exempt subject to contribution-limit conditions. NRO FD, NSC, RD, corporate bond and P2P interest are all fully taxable.

No. Public Provident Fund interest is fully exempt under Section 10(11), with no cap on the exempt amount, and no TDS is deducted. You should still disclose it under Schedule EI (Exempt Income) in your ITR for completeness, but it does not add to taxable income.

No. Interest on Non-Resident External (NRE) and FCNR accounts is exempt from Indian income tax under Section 10(4)(ii) as long as you qualify as a non-resident, and no TDS is deducted. NRO account interest, by contrast, is fully taxable and subject to TDS (usually 30% plus surcharge/cess under Section 195).

NSC interest accrues annually but is not paid out until maturity. You recognise it on an accrual basis each year in Schedule OS. For a 5-year NSC, the interest reinvested in years 1–4 can be claimed under Section 80C (within the ₹1.5 lakh limit) in the old regime, making those years largely tax-neutral. The final year's interest is paid at maturity and is fully taxable with no 80C relief. No TDS is deducted by the post office on NSC.

Yes. Interest earned on peer-to-peer lending and on corporate bonds/debentures is fully taxable at slab rates under "Income from Other Sources." TDS may apply — 10% under Section 194A for certain interest and under Section 193 on interest on securities. Report the gross interest in Schedule OS and claim any TDS credit.

Interest paid by the department on your income tax refund (under Section 244A) is taxable under "Income from Other Sources" in the year you receive it. It should be reported in your ITR; it usually appears in your AIS. The refund principal itself is not taxable — only the interest component is.

All taxable interest — FD, RD, savings, NSC accrual, P2P, refund interest — goes in Schedule OS (Income from Other Sources). Exempt interest such as PPF and NRE goes in Schedule EI. Claim 80TTA/80TTB in the deductions section (old regime), and claim TDS in Schedule TDS. Reconcile every figure with your AIS and Form 26AS before filing.

Even where TDS was fully deducted, omitting interest creates a mismatch with your AIS/Form 26AS and can trigger a notice and penalty for under-reporting under Section 270A (typically 50% of the tax on the under-reported income). Always report the gross interest and claim the TDS credit rather than leaving it out because tax was already deducted.

You report the gross interest and pay tax at your slab rate, then claim the TDS already deducted as a credit against that liability. If TDS (10%) is less than your slab tax, you pay the difference; if it is more (or your income is below taxable), the excess is refunded. TDS is never the final tax on interest.