Tax on Salary, Interest & EPF —
What You Actually Pay
How salary and perquisites, EPF and PF interest, and bank / FD / savings interest are taxed for FY 2025-26 — with the standard deduction, TDS thresholds, 80TTA/80TTB and how to report it all in your ITR.
Salary is taxed at slab rate after a standard deduction of Rs 75,000 (new, default regime) or Rs 50,000 (old). Bank, FD, RD and savings interest is fully taxable at your slab under "Income from Other Sources" — banks deduct 10% TDS once FD interest crosses Rs 50,000 a year (Rs 1,00,000 for senior citizens, since 1 April 2025). EPF is tax-free so long as your own contribution interest stays within Rs 2.5 lakh a year and you complete 5 years of service. 80TTA (Rs 10,000) and 80TTB (Rs 50,000) deductions on interest apply only in the old regime.
How Salary & Perquisites Are Taxed
Salary is taxed on a receipt-or-due basis at your slab rate. Most classic salary exemptions — HRA, LTA, and allowance-based reliefs — are available only in the old regime; the new (default) regime trades them for lower rates and a bigger standard deduction.
| Salary component | Old regime | New regime (default) |
|---|---|---|
| Standard deduction | Rs 50,000 | Rs 75,000 |
| HRA exemption u/s 10(13A) | Yes | No |
| LTA exemption u/s 10(5) | Yes | No |
| Gratuity u/s 10(10) (non-govt) | Up to Rs 20L | Up to Rs 20L |
| Leave encashment u/s 10(10AA) | Up to Rs 25L | Up to Rs 25L |
| Perquisites (car, RFA, ESOP) | Taxable (Rule 3) | Taxable (Rule 3) |
| Bonus / commission | Fully taxable | Fully taxable |
Gratuity and leave-encashment exemption limits (Rs 20L / Rs 25L) are once-in-a-lifetime aggregate ceilings for non-government employees and apply under both regimes.
HRA (u/s 10(13A)) and LTA (u/s 10(5)) are among the biggest salary exemptions — and both vanish under the default new regime. If you pay significant rent, run the numbers with our HRA exemption guide before locking your regime; the old regime plus HRA can still beat the new regime for high-rent salaried employees.
Not sure which regime saves you more on salary?
Compare with an expert →EPF & Provident Fund — When Is It Taxable?
EPF is broadly Exempt-Exempt-Exempt: your 12% contribution earns 80C, the interest (8.25% for FY 2024-25) compounds tax-free, and the maturity corpus is exempt — but only within limits. Two thresholds and the 5-year rule decide whether it stays tax-free.
| EPF / PF event | Taxable? | Detail |
|---|---|---|
| Interest on your contribution up to Rs 2.5L/yr | Tax-free | Rs 5L cap if employer makes no contribution — u/s 10(11)/(12) |
| Interest on contribution above Rs 2.5L/yr | Taxable | Excess-contribution interest taxed at slab each year |
| Employer PF+NPS+superannuation above Rs 7.5L/yr | Taxable | Employer contribution above Rs 7.5L is a perquisite |
| EPF withdrawal after 5 yrs continuous service | Exempt | Fully tax-free, no TDS |
| EPF withdrawal before 5 yrs of service | Taxable | TDS u/s 192A at 10% (20% without PAN) |
| Transfer of PF on job change | Not taxable | A transfer is not a withdrawal |
| VPF (voluntary extra contribution) | Same as EPF | Earns the EPF rate; counts to the Rs 2.5L interest cap |
The EPF interest rate is declared yearly by EPFO; 8.25% was approved for FY 2024-25.
Since FY 2021-22, interest on your own EPF+VPF contribution beyond Rs 2.5 lakh in a year is taxable (Rs 5 lakh where the employer contributes nothing). High earners piling into VPF can quietly cross this line — the excess interest is added to income and taxed at slab every year.
Tax on Bank, FD, Savings & Other Interest
Interest from banks, deposits and most other sources is fully taxable at your slab rate under "Income from Other Sources". Dividends are taxable at slab too (since FY 2020-21), and gifts from non-relatives above Rs 50,000 a year are taxed u/s 56(2)(x).
| Income source | Taxability | TDS | Relief |
|---|---|---|---|
| Bank savings interest | Slab | No TDS | 80TTA Rs 10,000 (old regime) |
| Bank / post-office FD & RD | Slab | 10% u/s 194A above Rs 50,000 (Rs 1L senior) | 80TTB Rs 50,000 for seniors (old) |
| Post-office savings account | Slab | No TDS | Rs 3,500 / Rs 7,000 exempt u/s 10(15)(i) |
| Dividend (shares / MFs) | Slab | 10% u/s 194 above Rs 10,000 | — |
| Gift from non-relative | Slab | No TDS | Exempt up to Rs 50,000/yr u/s 56(2)(x) |
| NSC accrued interest | Slab | No TDS | Reinvested interest counts under 80C (old) |
194A FD-TDS thresholds were raised to Rs 50,000 (general) and Rs 1,00,000 (senior citizens) from 1 April 2025 by Budget 2025.
FD interest — 30% slab
Senior citizen — 80TTB
TDS is only an advance — it is credited against your final liability. If your total income is below the exemption limit, file Form 15G / 15H so the bank does not deduct TDS. Always reconcile interest against your AIS before filing.
Banks deduct only 10% TDS, but FD interest is taxed at your full slab rate. A 30%-slab taxpayer still owes the balance 20%+cess when filing. Many taxpayers wrongly assume the 10% TDS settles it — leaving a shortfall (and interest u/s 234B/C) at return time.
Section 80TTA vs 80TTB
Under 60 / HUF
- Rs 10,000 deduction a year
- Savings-account interest only (not FD)
- Banks, co-op banks, post offices
- Old regime only
Senior citizens (60+)
- Rs 50,000 deduction a year
- ALL interest — savings, FD, RD
- Resident senior individuals only (no HUF)
- Old regime only; replaces 80TTA
Both interest deductions are old-regime only. If you opt for the default new regime, every rupee of savings and FD interest is taxable with no 80TTA/80TTB relief — though the higher Rs 75,000 standard deduction and lower slab rates may still make the new regime cheaper overall.
How to Report Salary, EPF & Interest in Your ITR
- Form 16 from employer
- EPF passbook / balance statement
- Bank interest certificates (savings + FD)
- Post-office deposit statements
- Dividend statements from broker / RTA
- AIS & Form 26AS reconciled
- Form 15G / 15H filed where eligible
- 80TTA / 80TTB claimed (old regime)
- HRA / rent proofs (old regime)
- Regime selected before filing
Want us to capture every head of income and file accurately?
Get ITR Filing Help →Salary, EPF & Interest Tax — Frequently Asked Questions
Related TaxClue Services
Next in this income-tax cluster
Salary, EPF & Interest — Taxed Right, Filed Once
Our CA-led team reconciles your Form 16, AIS and interest certificates, compares old vs new regime, claims HRA, 80TTA/80TTB and 80C where they help, and files your ITR accurately — 100% online, across India.