Updated 2026-07-13

Tax on FD Interest in India: Complete Guide

FD interest is taxed at your income tax slab rate: not at a flat 10% (that's just TDS). A 7% FD in the 30% bracket effectively earns 4.9%. Here's everything you need to know about FD taxation: TDS rules, slab calculation, senior citizen benefits, and legal ways to reduce the burden.

Income Bracket	Tax on ₹1L FD Interest	After-Tax Interest (on 7% FD)	TDS Deducted	Extra Tax at Filing
Up to ₹3L (0%)	₹0	₹1,00,000	₹10,000*	Refund ₹10,000
₹3-7L (5%)	₹5,200	₹94,800	₹10,000	Pay ₹0 (rebate)
₹7-10L (10%)	₹10,400	₹89,600	₹10,000	Pay ₹400
₹10-12L (15%)	₹15,600	₹84,400	₹10,000	Pay ₹5,600
₹12-15L (20%)	₹20,800	₹79,200	₹10,000	Pay ₹10,800
Above ₹15L (30%)	₹31,200	₹68,800	₹10,000	Pay ₹21,200

How FD Interest Tax Works: Step by Step

Interest accrues: Bank calculates interest quarterly/annually on your FD.
TDS is deducted: If interest exceeds ₹50,000/year (₹1,00,000 for seniors) at ONE bank, 10% TDS is auto-deducted. If PAN not submitted: 20% TDS.
Report in ITR: Declare full FD interest (from AIS/26AS) under "Income from Other Sources." Cumulative FDs: declare accrued interest every year, not just at maturity.
Pay balance tax: If your bracket is higher than 10%, you owe the difference. If lower, claim refund.

Common Mistakes People Make

"TDS is my final tax": Wrong. 10% TDS ≠ 10% total tax. If you're in 30% bracket, you owe 20% more at filing.
"No TDS means no tax": Wrong. If interest is below ₹50K at each bank individually, no TDS is cut. But you still owe tax on the total when filing ITR.
"I'll declare interest only at maturity": Wrong for cumulative FDs. Tax is on accrual basis. You must declare each year's accrued interest. The IT department has the data from bank reporting.
"Form 15G exempts me from tax": Wrong. Form 15G/15H only prevents TDS deduction. You still owe tax if your total income exceeds the basic exemption.

TDS Rules: When Banks Deduct

Threshold: ₹50,000/year per bank (₹1,00,000 for seniors)
Rate: 10% if PAN submitted, 20% if not
Timing: At credit (when interest is credited/accrued, even if FD hasn't matured)
Multiple FDs at same bank: Interest is clubbed across all FDs at that bank for threshold calculation
Multiple banks: Each bank calculates independently. ₹35K at SBI + ₹35K at HDFC = no TDS anywhere, but ₹70K taxable income

Legal Strategies to Reduce FD Tax

Split across family members: Spouse/parents in lower brackets can hold FDs in their name (gift taxation applies: consult CA for amounts above ₹50K).
5-year Tax Saver FD: Gets Section 80C deduction up to ₹1.5L (old regime only). Interest is still taxable, but you save tax on the principal invested.
Stay under ₹50K per bank: If you have a large sum to invest, split it across multiple banks so the interest stays under ₹50K at each bank individually to avoid TDS deduction (though the interest remains taxable).
Consider arbitrage funds: Taxed as equity (12.5% LTCG after 1 year with ₹1.25L exemption). Gives FD-like returns with far better tax efficiency.
Senior citizens: maximize 80TTB: ₹50,000 deduction on interest income. On a 7% FD, that's the first ≈₹7.1L of FD principal that's effectively tax-free on interest.

New Tax Regime vs Old: Impact on FD

Key differences for FD holders:

Old regime: Section 80TTA (₹10K savings interest deduction) + 80TTB (₹50K for seniors) + 80C (₹1.5L for tax-saver FD)
New regime: Zero deductions for interest income. No 80TTA, no 80TTB, no 80C benefit for tax-saver FD
Impact: Heavy FD investors often benefit from old regime due to 80TTB (seniors) or 80C (tax-saver FD) deductions

Frequently Asked Questions

Is TDS on FD the final tax?

No. TDS (10%) is an advance tax collection, not your final liability. If your total income puts you in the 20% or 30% bracket, you owe additional tax on FD interest at ITR filing. Example: ₹50,000 FD interest, 30% bracket = ₹15,000 tax owed. TDS collected = ₹5,000. You pay ₹10,000 more at filing.

How to avoid TDS on FD?

Submit Form 15G (or Form 15H for senior citizens) to your bank if your total income is below the taxable limit. This only prevents TDS deduction, it does not exempt you from tax. If your income is above the basic exemption, you cannot legally avoid tax on FD interest.

Is FD interest taxed in new tax regime?

Yes. FD interest is fully taxable in both old and new tax regimes. The new regime has no Section 80TTA/80TTB deduction for interest income. However, tax-saver FD (5-year lock-in) qualifies for 80C deduction only in the old regime. New regime investors get zero FD-related deductions.

What if I have FDs in multiple banks?

TDS threshold (₹50,000) applies per bank, not total. So ₹30,000 interest from SBI + ₹30,000 from HDFC = no TDS from either bank. But you still owe tax on the full ₹60,000 when filing ITR. Banks don't talk to each other for TDS, but the Income Tax Department sees all through AIS (Annual Information Statement).

How is FD interest taxed for senior citizens?

Senior citizens (60+) get: (1) Higher TDS threshold of ₹1,00,000/year instead of ₹50,000, (2) Section 80TTB deduction of up to ₹50,000 on interest income (old regime only), (3) Often higher FD rates (0.25-0.5% extra). A senior citizen in the 0% bracket with ₹50K deduction pays zero effective tax on FD interest.

Try it yourself → FD Calculator