Tax Deducted at Source (TDS) applies to interest earned on bank fixed deposits, savings accounts, and recurring deposits when it exceeds specified limits in a financial year, acting as an advance tax payment claimable via ITR.
Who Pays TDS and Thresholds
Banks deduct TDS at 10% on interest above ₹40,000 annually for individuals under 60 years (₹50,000 for senior citizens) across all accounts in the same bank under core banking systems. Submit Form 15G (below 60) or 15H (senior citizens) if total income stays below taxable limits to avoid deduction. Without PAN, TDS jumps to 20%.
Calculation Example
For ₹60,000 FD interest (under ₹40,000 limit met): TDS = 10% of ₹60,000 = ₹6,000 deducted. Claim refund if eligible via ITR; aggregate applies across FDs even if individual ones fall below threshold.
| Category | Threshold Limit | TDS Rate (with PAN) |
|---|---|---|
| General (<60 yrs) | ₹40,000 | 10% |
| Senior Citizens (60+ yrs) | ₹50,000 | 10% |
| No PAN | Any amount | 20% |
New FY 2026-27 rules reset employer TDS computations from April 1, but bank interest TDS remains unchanged under Section 194A.
