Income Tax on Fixed Deposit & Savings Interest Income
TDS deducted by your bank is rarely your final tax bill. Here's how interest from FDs and savings accounts actually gets taxed, and where the gap usually shows up.
A 10% TDS on your FD interest doesn't mean you're done - it only means the bank has paid a part of what you may eventually owe, based on your actual slab rate.
TDS on Savings Account Interest
Banks do not deduct TDS on interest earned from savings accounts. Under Section 80TTA of the Income Tax Act, if you're an Indian resident aged 60 years or below, interest income up to ₹50,000 in a financial year is not taxable. Anything earned above this threshold becomes taxable in your hands.
TDS on Fixed Deposits
TDS on Fixed Deposits works differently. Here, the bank deducts a portion of the interest you earn and deposits it directly with the Income Tax Department on your behalf, before the interest ever reaches your account.
How TDS on FD Interest is Calculated
Two factors determine how much is deducted:
Applicable TDS Rate
10% for resident individuals who've provided their PAN to the bank; 20% if PAN hasn't been furnished. Non-resident individuals may attract different rates depending on tax status and applicable treaties.
Threshold Amount
TDS applies once total FD interest from all deposits with a bank crosses ₹50,000 in a financial year - or ₹1,00,000 for senior citizens aged 60 and above.
Total Income Tax Calculation
It's worth being clear about what TDS actually covers: it is deducted only on your fixed deposit interest, not on your total income. Your overall tax liability also pulls in salary, rental income, business income, and any other sources you have - interest is just one piece of that picture. For a broader view of how income from all sources is taxed, see our Income Tax FAQs.
Worked Example
Because Suresh is in the 30% bracket but the bank only withheld at 10%, he still owes the difference - ₹10,000 - when he files his return. This gap is exactly why FD interest needs to be reported even when TDS has already been deducted. Our guide on ITR Filing Essentials covers what to include when preparing your return.
Section 80TTB
Senior citizens aged 60 years and above get a more generous benefit here: Section 80TTB allows a deduction of up to ₹1,00,000 per annum on interest earned from both fixed deposits and savings accounts combined - replacing the lower 80TTA limit available to younger taxpayers.
If you hold FDs across several banks or are unsure whether your TDS deductions are tracking your actual slab rate, our Taxation team is happy to review your interest income and flag any shortfall before it shows up as a notice. Comparing how interest income is treated under each regime is also covered in our New Tax Regime vs Old guide.
