Tax on FD Interest in India — TDS, Form 15G & Accrual Rules 2026-27

Updated: 3 June 2026 | Income-tax Act, 2025 | Verified against CBDT notifications

FD interest is fully taxable as "Income from Other Sources" at your applicable income tax slab rate — there is no flat rate. Banks deduct TDS at 10% if total interest from that bank exceeds ₹40,000/year (₹50,000 for senior citizens). Cumulative FD interest is taxable on accrual basis, not on receipt.

10% TDS

TDS threshold: ₹40,000/year per bank (₹50,000 for senior citizens)
Applies per bank branch. Submit Form 15G / 15H at the start of the year to avoid TDS if your total income is below taxable limit.

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Cumulative FD trap: Even if your bank pays interest only at maturity, you must declare accrued interest every year on an accrual basis. Missing this can result in advance tax interest under Section 234B/234C.

FD Type — TDS Rate, Threshold & Tax Treatment

FD Type / Depositor	TDS Rate	TDS Threshold	How to Avoid TDS	Tax Treatment
Regular Bank FD (below 60 yrs)	10%	₹40,000/year per bank	Form 15G	Taxable at slab rate (accrual basis)
Senior Citizen FD (60+ yrs)	10%	₹50,000/year per bank	Form 15H	Taxable at slab rate; 80TTB deduction up to ₹50,000
Cooperative Bank FD	10%	₹40,000/year	Form 15G / 15H	Taxable at slab rate (accrual basis)
Post Office Time Deposit	10%	₹40,000/year	Form 15G / 15H	Taxable at slab rate
Tax-Saving FD (Section 80C)	10%	₹40,000/year	Form 15G / 15H	Deposit: 80C deduction (old regime). Interest: fully taxable
NRI — NRE FD	Nil TDS	—	—	Interest fully exempt from Indian tax
NRI — NRO FD	30%	No threshold	DTAA relief (Form 10F)	Taxable at 30% (+ surcharge + cess)

How TDS on FD Interest Works

The bank calculates your total interest across all FD accounts held with that bank (and its branches) during the financial year. If the aggregate exceeds ₹40,000 (₹50,000 for senior citizens), it deducts TDS at 10% on the entire interest amount — not just the excess. TDS is deposited against your PAN, and you can verify it in Form 26AS and AIS.

TDS is deducted at the time of payment or credit to your account — whichever is earlier. For cumulative FDs, banks typically credit TDS annually even if the principal + interest is only paid at maturity.

Form 15G and Form 15H — Eligibility & Process

BELOW 60 YEARS

Form 15G

Self-declaration to the bank that your total income is below the taxable limit (₹2,50,000) and tax liability is nil. Submit at the beginning of the financial year. Valid for one financial year — must be renewed annually. Can be submitted online via net banking for most banks.

SENIOR CITIZENS (60+)

Form 15H

Senior citizen version of Form 15G. Condition: estimated total tax liability for the year is nil (Section 80TTB ₹50,000 deduction helps seniors meet this). No income-amount threshold — only the tax-liability-nil condition. Submit to each bank separately at the start of every financial year.

Tax-Saving FD — Section 80C vs Taxable Interest

A 5-year Tax-Saving FD qualifies for deduction under Section 80C (up to ₹1.5 lakh) under the old tax regime. However, the interest earned on a tax-saving FD is fully taxable — it does not enjoy any exemption. TDS is deducted at 10% if interest exceeds ₹40,000/year. Premature withdrawal is not allowed before 5 years.

Senior Citizens — Section 80TTB Benefit

Under the old tax regime, senior citizens (60+ years) can claim a deduction of up to ₹50,000 under Section 80TTB on interest income from savings accounts, FDs, recurring deposits, and post office deposits. This is in addition to the higher TDS threshold of ₹50,000. Section 80TTB is not available under the new tax regime.

Act mapping note: TDS on FD interest is governed by Section 194A of the Income Tax Act, 1961 (mapped to corresponding provisions in the Income-tax Act, 2025 effective 01-Apr-2026). The ₹40,000/₹50,000 thresholds and 10% TDS rate are unchanged for Tax Year 2026-27 per CBDT circulars.

Frequently Asked Questions

Is FD interest taxed on accrual basis or receipt basis?

FD interest is taxed on accrual basis, not receipt basis. For cumulative FDs (where interest is paid at maturity), you must still declare the interest accrued each year in your ITR — not just when you actually receive it at maturity. Banks issue a TDS certificate and the interest accrues annually. Failure to declare accrued interest each year can lead to interest shortfall under advance tax provisions.

Can I submit Form 15G to avoid TDS on FD interest?

Yes, but only if you meet all three conditions: (1) you are below 60 years of age, (2) your total income for the year is below the basic exemption limit (₹2,50,000 for individuals below 60), and (3) the tax calculated on your total income is nil. Submit Form 15G at the beginning of the financial year to the bank. Senior citizens (60+) should use Form 15H instead, which has a more relaxed condition — total tax liability must be nil, regardless of income amount.

How is tax calculated on a joint FD?

For a joint FD, the interest is taxable in the hands of the primary/first account holder only. The second holder does not separately declare or pay tax on the same interest. However, if the funds deposited originally belonged to the second holder (clubbing provisions), the income may be clubbed with the original fund owner's income. In practice, banks deduct TDS in the name and PAN of the primary account holder.

Is interest on an auto-renewed FD taxable in the year of renewal?

Yes. When an FD is auto-renewed, the interest earned up to the date of original maturity must be declared in that financial year — even if the money was immediately reinvested. The renewal is treated as a fresh deposit. So you must report the accrued/credited interest income in the year the original FD matures, regardless of whether you withdraw the funds or let them roll over automatically.

Does the ₹40,000 TDS threshold apply per bank or in total across all banks?

The ₹40,000 TDS threshold (₹50,000 for senior citizens) applies per bank separately — not in aggregate across all banks. Each bank calculates TDS based only on interest paid by that bank. So if you earn ₹35,000 interest from Bank A and ₹35,000 from Bank B, neither bank deducts TDS. However, your total FD interest of ₹70,000 is still fully taxable and must be declared in your ITR at your applicable slab rate.

Section 80TTA Income from Other Sources Income Tax Slabs 2026-27 Senior Citizen Tax Form 26AS Advance Tax

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