6 TDS on FD Interest Facts Every Saver Should Know Before Filing ITR in 2026

By Nitish Bharadwaj · Published Jul 5, 2026 · 6 min

Every bank now deducts 10% TDS once your annual FD interest crosses ₹50,000 — or ₹1 lakh if you're a senior citizen — thresholds Budget 2025 raised from ₹40,000 and ₹50,000 respectively, effective FY 2025-26, the very year most taxpayers are filing returns for now. But the limit applies separately to each bank, TDS deducted is only an advance against your real tax liability rather than a final settlement, and Form 15G/15H can stop the deduction entirely if your total income stays below the taxable limit. This guide covers the current thresholds, why splitting FDs across banks doesn't reduce your actual tax, and how to claim back excess TDS.

You check your FD statement in July 2026 and notice the bank has already deducted tax before crediting your interest. That's TDS under Section 194A, and while the rule itself isn't new, Budget 2025 raised the thresholds that decide whether it applies to you — changes that are live for the very financial year (2025-26) most taxpayers are filing returns for right now.

Fact 1: The Threshold Went Up, Effective the Year You're Filing For

Budget 2025 raised the Section 194A TDS threshold for interest paid by banks, cooperative banks, and post offices, effective from April 1, 2025 — which covers all of FY 2025-26, the year most salaried taxpayers are filing their ITR for by July 31, 2026.

TDS is deducted at 10% once interest crosses the threshold, rising to a flat 20% under Section 206AA if your PAN has turned inoperative from not linking it to Aadhaar — a separate override that applies regardless of how much interest you're earning. So a senior citizen earning ₹90,000 in FD interest from one bank in FY 2025-26 now pays zero TDS on it, where the same amount would have crossed the old ₹50,000 limit and triggered a deduction.

Fact 2: The Threshold Applies Per Bank, Not on Your Total Interest

This is the detail that trips up most savers: the ₹50,000 (or ₹1 lakh) limit is checked separately at each bank, not added up across every FD you hold. If you have ₹40,000 of interest at Bank A and ₹40,000 at Bank B in the same year, neither bank deducts TDS — even though your combined interest income is ₹80,000.

One old-regime deduction can still reduce that taxable interest before you get to slab rate: Section 80TTA/80TTB lets senior citizens deduct up to ₹50,000 of combined savings-account-plus-FD interest, and non-seniors deduct up to ₹10,000 of savings account interest alone — worth checking before assuming your entire FD interest is taxed in full.

Fact 3: Form 15G/15H Stops the Deduction If You're Not Actually Taxable

If your total income is below the basic exemption limit, you can submit Form 15G (for those under 60) or Form 15H (for senior citizens) to each bank at the start of the financial year, declaring that your income doesn't require TDS. This has to be filed separately at every bank where you hold an FD — submitting it at one bank doesn't cover deposits elsewhere. It's worth doing even for small FDs, since getting TDS back later takes an extra filing step.

Fact 4: TDS Deducted Is an Advance, Not the Final Word — Claim It Back

If your total tax liability for the year is lower than the TDS already deducted on your FD interest — a common scenario for someone with only moderate income and one large FD — that excess is refundable, not lost. It shows up as tax already paid when you file, and any refund due follows the ITR filing process for FY 2025-26. If a refund seems delayed, check our guide on why ITR refunds get held up and how to fix it — a mismatch between TDS shown in your Form 26AS/AIS and what you've claimed is one of the most common causes.

Fact 5: A Renumbering Is Coming, But Not for This Year's Return

Under the Income-tax Act, 2025, the provisions currently in Section 194A are set to be renumbered as Section 393(1), effective April 1, 2026 — but this is a structural renumbering for FY 2026-27 onward, not a change to the rates or thresholds themselves. The return you're filing now for FY 2025-26 still falls entirely under the existing 1961 Act framework, so nothing about this changes what you owe or report today.

Fact 6: Higher FD Rates Make This More Relevant, Not Less

With FD rates from small finance banks still running 7.5%–8% for senior citizens, it takes a smaller deposit than it used to for annual interest to cross even the higher ₹1 lakh threshold. Before renewing or booking a large FD this year, run the numbers through the income tax calculator to see whether the interest pushes you into a higher slab, and file Form 15G/15H promptly wherever it genuinely applies — it's the one step most FD holders forget until the TDS has already been deducted.