Joint FD Account Tax Rules 2026: Who Pays TDS and How to Avoid Double Taxation

By Nitish Bharadwaj · Published Jul 24, 2026 · 6 min

On a joint FD, banks deduct TDS entirely against the first holder's PAN — the second holder's tax slab or exemption status is irrelevant to how TDS gets withheld. Tax liability itself follows actual contribution: whoever put in the money owes tax on that share, not whoever's name is listed first. Rule 37BA lets a joint holder claim TDS credit that landed on the other person's PAN by filing a bank declaration. Mismatched reporting against your AIS is a common, avoidable notice trigger — document contribution shares in writing when you open the account.

Adding a spouse or parent as a second holder on a fixed deposit is routine — it's how most families structure FDs, and for good reason: it simplifies survivorship and gives either holder access to the account. What it doesn't do is split the tax bill evenly, or automatically. Banks deduct TDS against exactly one PAN on a joint FD, and the person who actually owes tax on the interest is decided by a completely different rule. Get the two confused and you either overpay tax you don't owe, or under-report income and risk a mismatch notice against your Annual Information Statement (AIS).

TDS Is Deducted Against the First Holder's PAN — Full Stop

When a bank pays or credits FD interest, it checks one PAN to decide whether TDS applies: the first (primary) holder's. It does not matter whose money actually funded the deposit, and it does not matter whether the second holder's total income is below the taxable threshold. If the primary holder's cumulative interest across all FDs with that bank crosses the Section 194A threshold — ₹50,000 for the year, ₹1,00,000 for senior citizens, as covered in our TDS on FD interest guide — the bank deducts 10% TDS (or 20% without a PAN on file) and reports it under the primary holder's PAN in Form 26AS and AIS.

Tax Liability Follows Contribution, Not the Account Name

TDS is a withholding mechanism — it is not the final word on who owes tax. Under the Income Tax Act, interest income is taxable in the hands of whoever actually contributed the funds, in proportion to their share. If you deposited the full amount and added your spouse only as a joint holder for convenience or survivorship, the entire interest is taxable in your hands alone, and you report all of it in your own ITR — regardless of whose PAN the bank's TDS entry sits under.

This is exactly the same principle that governs DICGC insurance cover on joint accounts — the law looks at substance (who actually owns the funds), not just the names printed on the passbook. Document how much each holder contributed at the time you open the FD, ideally with a simple note or the funding bank transfer reference, so there's a clear record if either your return or the bank's TDS entry is ever questioned.

Rule 37BA: Fixing a TDS Credit That Landed on the Wrong PAN

If TDS was deducted under the primary holder's PAN but the interest is actually taxable — wholly or partly — in the second holder's hands, Rule 37BA of the Income Tax Rules provides the fix. It allows the person whose PAN TDS was deducted under to file a declaration with the deductor (the bank) stating that the income, and the corresponding TDS credit, belongs to another person in a specified proportion. Once the bank processes this, the TDS credit reflects correctly in the actual taxpayer's Form 26AS, and both parties can report income and claim credit consistently with reality rather than with what the bank's system shows by default.

• The primary holder (whose PAN carries the TDS entry) submits a written declaration to the bank specifying the other holder's PAN and their share of the income
• The bank is required to file this information while filing its own TDS return, after which the credit splits between both PANs in Form 26AS/AIS
• Without this step, the non-primary contributor who reports their actual share of interest in their own ITR may not get matching TDS credit — leading to a demand notice for tax already deducted, just under someone else's PAN
• This is worth doing whenever the funding split is meaningfully unequal, not just symbolic — for a 50-50 joint FD between spouses in similar tax brackets, most people skip it since the net tax outcome barely moves

Why AIS Mismatches Happen — and How to Avoid One

The Annual Information Statement pulls interest income directly from what banks report against each PAN. If you're the actual owner of FD interest but not the primary holder, your AIS may show little or no matching entry for that income — which looks fine at first, but creates a problem the moment you correctly report your contributed share as income in your ITR without a matching TDS credit to offset it. The reverse also happens: a primary holder's AIS shows the full interest and full TDS, even though they only contributed half the deposit, tempting some filers to simply accept the AIS figure and over-report their own income rather than sort out the actual split.

Neither shortcut is correct. The safer approach, consistent with how Form 15G and 15H filings are meant to work for genuine account owners, is to report income based on actual contribution every time, use Rule 37BA to move TDS credit to match that reality when the amounts are significant, and keep a simple funding record for every joint FD you open — the same discipline that matters for FD nominee planning, where clarity on ownership avoids disputes at maturity or on the account holder's death.