Tax on FD Interest,
Salary, EPF & Other Income
How fixed-deposit interest, salary and perquisites, EPF/PF, gratuity, dividends and gifts are taxed for FY 2025-26 — the slab treatment, the raised TDS thresholds and the exemptions you can still claim.
Fixed-deposit interest is fully taxable at your income-tax slab rate as "Income from Other Sources" — there is no flat or concessional rate. The bank deducts TDS at 10% under Section 194A once interest from that bank crosses Rs 50,000 a year (raised from Rs 40,000 by Budget 2025), or Rs 1,00,000 for senior citizens. TDS is not the final tax — you must add the interest to your return and pay any balance at your slab. Interest is taxed on accrual, so declare it every year even on cumulative FDs.
From 1 April 2025 (FY 2025-26), the Section 194A TDS threshold on bank/co-operative/post-office interest rose from Rs 40,000 to Rs 50,000 for the general public and from Rs 50,000 to Rs 1,00,000 for senior citizens. The 10% TDS rate is unchanged. The threshold is per bank, but the whole interest remains taxable in your ITR regardless of TDS.
FD Interest — TDS Rate, Threshold & Tax Treatment
The bank aggregates interest across all your FDs with it in the year; if the total crosses the threshold it deducts TDS at 10% on the entire interest (20% without PAN). Verify credited TDS in your Form 26AS and AIS.
| Depositor / FD type | TDS rate | Threshold (per bank) | Avoid TDS | Tax treatment |
|---|---|---|---|---|
| Resident, below 60 | 10% | Rs 50,000/yr | Form 15G | Slab rate (accrual) |
| Senior citizen (60+) | 10% | Rs 1,00,000/yr | Form 15H | Slab; 80TTB Rs 50k (old regime) |
| Co-operative / post-office deposit | 10% | Rs 50,000/yr | Form 15G / 15H | Slab rate (accrual) |
| 5-year tax-saving FD | 10% | Rs 50,000/yr | Form 15G / 15H | Deposit: 80C. Interest: taxable |
| No PAN given to bank | 20% | Rs 50,000/yr | — | Slab; higher TDS u/s 206AA |
| NRI — NRE FD | Nil | — | — | Exempt from Indian tax |
| NRI — NRO FD | 30% | No threshold | DTAA (Form 10F) | Taxable @30% + surcharge + cess |
Section 194A. Thresholds effective FY 2025-26 (Budget 2025). Interest is taxed on accrual, not just at maturity.
Even when the bank pays interest only at maturity, interest is taxable on an accrual basis each year. Report the interest that accrued in the year in your ITR; skipping it can trigger advance-tax interest under Sections 234B/234C when the lump sum surfaces at maturity.
Have FD interest across several banks? Get it reconciled with your AIS and filed correctly.
Get ITR Filing Help →Salary, HRA, Perquisites & Retirement Benefits
Salary is taxed at slab after the standard deduction — Rs 75,000 in the new (default) regime and Rs 50,000 in the old regime. Most salary exemptions (HRA, LTA, and others) are available only in the old regime; the new regime trades them for lower slab rates.
| Component | Section | Exemption / limit | Regime |
|---|---|---|---|
| Standard deduction | 16(ia) | Rs 75,000 (new) / Rs 50,000 (old) | Both |
| House Rent Allowance (HRA) | 10(13A) | Least of actual HRA, 50%/40% of basic+DA, rent − 10% of salary | Old only |
| Leave Travel Allowance (LTA) | 10(5) | 2 domestic journeys in a 4-year block | Old only |
| Gratuity (non-govt) | 10(10) | Exempt up to Rs 20,00,000 | Both |
| Leave encashment on retirement (non-govt) | 10(10AA) | Exempt up to Rs 25,00,000 | Both |
| Retrenchment compensation | 10(10B) | Exempt up to Rs 5,00,000 | Both |
| Family pension standard deduction | 57(iia) | 1/3rd, max Rs 25,000 (new regime) | New (raised) |
HRA/LTA and most Chapter VI-A deductions are lost in the new regime. Perquisites (car, rent-free accommodation, ESOP) are valued under Rule 3.
Perquisites such as a company car, rent-free or concessional accommodation and ESOPs are taxed as salary. ESOPs are taxed at exercise on FMV minus exercise price; eligible startups get a deferral of the TDS. Bonus is fully taxable as salary in the year received.
Want your HRA, LTA and perquisites optimised across old vs new regime?
Check with HRA Calculator →EPF, VPF & PF Withdrawal Tax
Both employee and employer contribute 12% of basic+DA to EPF. EPF interest for FY 2025-26 is ratified at 8.25%. Contributions and interest are broadly tax-free (EEE), but recent caps make part of it taxable for high earners.
- Interest on employee EPF contribution above Rs 2,50,000 a year is taxable (Rs 5,00,000 if there is no employer contribution) — u/s 10(11)/(12).
- Employer contribution to EPF + NPS + superannuation together above Rs 7,50,000 a year is taxable as a perquisite, and the interest on the excess too.
- VPF (Voluntary Provident Fund) is extra employee contribution earning the same 8.25% and qualifying under 80C — but it counts towards the Rs 2.5 lakh interest-taxability cap.
- Transfer of PF on changing jobs is not taxable.
If you withdraw EPF with less than 5 years of continuous service, the amount is taxable and the EPFO deducts TDS at 10% under Section 192A (20% if PAN is not furnished; no TDS if the taxable amount is below Rs 50,000). After 5 years of continuous service, EPF withdrawal is fully exempt. See our PF withdrawal guide.
Withdrawing or transferring your PF? Get the tax and TDS position confirmed.
PF Withdrawal Guide →Dividends, Gifts & Savings Interest
| Income | How it is taxed | TDS | Deduction |
|---|---|---|---|
| Dividend (shares / MF) | Slab rate (since FY 2020-21) | 10% u/s 194 above Rs 10,000 | — |
| Savings-account interest | Slab rate | No TDS | 80TTA Rs 10k (old) |
| Senior citizen deposit interest | Slab rate | TDS above Rs 1,00,000 | 80TTB Rs 50k (old) |
| Gift from non-relative > Rs 50,000/yr | Fully taxable u/s 56(2)(x) | — | — |
| Gift from a relative / on marriage | Exempt | — | — |
| Bonus from employer | Taxable as salary | As per salary TDS | — |
80TTA (savings interest, non-seniors) and 80TTB (deposit interest, seniors) are available only in the old regime.
Dividends are taxable at your slab in the year received; the company/AMC deducts 10% TDS under Section 194 once dividends cross Rs 10,000. Gifts from non-relatives are taxable once total gifts in a year exceed Rs 50,000; gifts from specified relatives, on marriage, or by will are exempt. See dividend tax and gift tax for the detail.
Old regime — interest deductions
- 80TTA: Rs 10,000 savings interest (below 60)
- 80TTB: Rs 50,000 deposit interest (seniors)
- HRA, LTA and Chapter VI-A allowed
- Standard deduction Rs 50,000
New regime (default)
- 80TTA / 80TTB not available
- Most salary exemptions not available
- Lower slab rates, 87A rebate up to Rs 12L income
- Standard deduction Rs 75,000
Not sure which regime saves you more on salary, interest and dividends?
Compare with the calculator →Tax on FD Interest & Other Income — FAQs
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Our CA-led team reconciles your interest, salary, perquisites, EPF and dividends with your AIS, picks the better regime and files an accurate ITR — 100% online, across India.