Bank FD: Tax deduction (TDS) on fixed deposits means that banks or financial institutions deduct tax on the interest earned from fixed deposits if it exceeds a specific limit during a financial year.

For individuals below the age of 60, TDS is applicable when the annual interest income exceeds Rs 40,000. For senior citizens, the limit is Rs 50,000. The standard TDS rate is 10 per cent. But it increases to 20 per cent if the depositor has not provided his Permanent Account Number (PAN).

How is TDS calculated on fixed deposits?
The interest earned from fixed deposits is fully taxable. This interest forms a part of your total income, affecting your tax liability. When you earn interest on FD in a financial year, it gets included in your annual income, and you may have to pay the prescribed income tax on it.

Your tax slab is determined based on the total income. Since interest income earned on FD is considered as income from other sources, it is taxed under tax deduction at source or TDS. When your bank credits your interest income to your account, TDS is deducted at the same time.

How to avail of TDS exemption on FD?

To avoid TDS deduction on FD interest in India, you can submit Form 15G or Form 15H to your bank. These forms act as a self-declaration, informing the bank that your total income is less than the basic exemption limit. This will not result in TDS being deducted from your FD interest, and you will be able to avail your full amount. The process is simple and effective.

If you are below 60 years of age, use Form 15G and if you are 60 years of age or above, use Form 15H. By submitting these forms to your bank, you ensure that TDS is not deducted, allowing you to take your entire FD interest without tax deduction, provided your income remains within the exemption limit.

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