Fixed Deposits (FDs) are one of the most trusted savings instruments in India. They offer guaranteed returns and safety of capital, but the interest earned is not entirely tax-free. Banks deduct TDS (Tax Deducted at Source) on FD interest once it crosses certain limits.
From April 1, 2025, the Government of India has announced higher TDS exemption limits, which means depositors — especially senior citizens — can now enjoy more tax-free interest income. Understanding TDS on Fixed Deposits 2025 is crucial for maximizing your investment returns.
This article explains what TDS on FD is, how it works, the new rules effective from April 2025, and how you can save more on your deposits.
What is TDS on Fixed Deposits 2025?
According to Section 194A of the Income Tax Act, TDS on Fixed Deposits 2025 follows these key principles:
- Banks and financial institutions deduct TDS on the interest income from Fixed Deposits
- Deduction happens when interest is credited (annually, quarterly, or at maturity)
- TDS rates:
- 10% if PAN is provided
- 20% if PAN is not provided
- Deducted TDS is reflected in Form 26AS and Annual Information Statement (AIS), and can be claimed back while filing ITR
📄 Source: Income Tax Department – Section 194A
New TDS Rules for Fixed Deposits 2025
The Union Budget 2025 raised the TDS exemption thresholds for FD interest, making TDS on Fixed Deposits 2025 more favorable for investors.
| Category | Old Limit | New Limit (From April 1, 2025) |
| Non-senior citizens | ₹40,000/year | ₹50,000/year |
| Senior citizens (60+) | ₹50,000/year | ₹1,00,000/year |
✅ Impact: If your annual FD interest is below these limits, no TDS will be deducted under the new TDS on Fixed Deposits 2025 rules.
📄 Source: Union Budget 2025 – Ministry of Finance
Core Banking System (CBS) Rule in TDS on Fixed Deposits 2025
Most banks in India operate under Core Banking System (CBS), which means:
- Your FD interest across all branches of the same bank (linked to your PAN) is aggregated
- If the total exceeds the exemption limit, TDS is deducted
- Example: If you earn ₹30,000 interest from one branch and ₹25,000 from another = ₹55,000 → TDS will apply
How to Avoid TDS on Fixed Deposits 2025
If your total annual income is below the taxable limit, you can prevent TDS deduction by submitting:
- Form 15G (for individuals below 60 years)
- Form 15H (for senior citizens 60+)
Submit these forms to your bank at the start of the financial year to ensure no TDS deduction under the TDS on Fixed Deposits 2025 framework.
📄 Download Forms from: Income Tax India – Forms 15G & 15H
Example: TDS on Fixed Deposits 2025 Before vs After New Rules
Case: A non-senior citizen earns ₹48,000 interest in a financial year.
- Before April 2025 → Limit was ₹40,000 → TDS on ₹8,000 @10% = ₹800 deducted
- After April 2025 → New limit ₹50,000 → No TDS deducted
👉 Result: Investor saves ₹800 upfront and avoids refund hassles under the new TDS on Fixed Deposits 2025 rules.
Also Read: Avoid Money Mistake in Your 40s
Who Benefits Most from TDS on Fixed Deposits 2025?
- Senior citizens: Double the exemption (₹1,00,000 vs ₹50,000 earlier)
- Small depositors: Those earning ₹40–50k interest annually now escape TDS
- Tax-exempt individuals: Easier to manage cash flow with higher limits
Tax-Saving Tips for Fixed Deposits 2025
- Link your PAN to your bank account to avoid 20% TDS
- Keep track of total FD interest across all banks
- Submit Form 15G/15H early if eligible
- Verify TDS entries in Form 26AS before filing your ITR
Remember: Even if TDS is not deducted under TDS on Fixed Deposits 2025, FD interest is taxable under “Income from Other Sources.”
Frequently Asked Questions (FAQs) on TDS on Fixed Deposits 2025
1. What is the TDS rate on Fixed Deposit interest in 2025?
10% (with PAN) or 20% (without PAN). For NRIs, it is 30% + surcharge + cess.
2. How much FD interest is exempt from TDS in 2025–26?
- ₹50,000 for non-senior citizens
- ₹1,00,000 for senior citizens
3. Is FD interest completely tax-free under TDS on Fixed Deposits 2025?
No. Even if no TDS is deducted, FD interest is still fully taxable as income. You must declare it in your ITR.
4. Can I avoid TDS on Fixed Deposits 2025 legally?
Yes, by submitting Form 15G/15H if your income is below the taxable limit.
5. Do NRIs get the same benefit from TDS on Fixed Deposits 2025?
No. NRIs face a flat TDS of 30% (plus cess/surcharge) on FD interest, regardless of the threshold.
6. How can I check if TDS has been deducted?
Through:
- Form 26AS on the Income Tax portal
- Annual Information Statement (AIS)
- Bank’s TDS certificate (Form 16A)
Conclusion
The new TDS on Fixed Deposits 2025 rules effective from April 1, 2025 are a welcome relief for depositors. With higher exemption limits, especially for senior citizens, more interest income stays in your hands.
Still, remember that FD interest remains taxable — even if no TDS is deducted under the TDS on Fixed Deposits 2025 framework. Plan your savings, track interest across banks, and use Forms 15G/15H if eligible to maximize your returns.
References
- Income Tax Department – Section 194A
- Union Budget 2025 – Ministry of Finance
- CBDT Notifications & Circulars
Disclaimer: This article is for educational purposes only and should not be treated as personal tax advice. Please consult a qualified tax professional for guidance specific to your situation.