Now, The Income-Tax Act, 2025 came into force on 1 April 2026. Under the new Act, resident bank deposit interest falls within Section 393(1), Table Sl. No. 5(ii). The consolidation of TDS provisions into Section 393 does not, by itself, change the applicable deduction rates.

This guide focuses on resident individuals and senior citizens holding bank FDs and RDs for Tax Year 2026–27, covering 1 April 2026 to 31 March 2027. Earlier periods remain subject to the relevant provisions of the old Act.

What is TDS on FD and RD Interest?

TDS is a collection of tax at the point where eligible income is credited or paid. TDS is applicable when the annual income exceeds ₹50,000 per financial year for resident individuals and ₹1 lakh per financial year for senior citizens. As per the Income Tax Department of India, Tax Deducted at Source on FD and RD interest is charged at 10% if PAN is provided.

When Does TDS Apply to Your Deposit Interest?

For resident individuals, the following annual thresholds apply to bank FD and RD interest:

How is Interest Across Deposits Aggregated?

Your bank considers the combined eligible interest from your FDs and RDs. With core banking, opening deposits at different branches of the same bank does not give you a separate threshold for each branch.

For example, if you are below 60 and earn ₹35,000 from an FD and ₹20,000 from an RD at the same bank, your combined interest is ₹55,000. This exceeds the ₹50,000 threshold.

Separate banks generally assess their deduction obligations independently. However, you still need to consider your interest from all banks when calculating your total taxable income. The threshold is not a tax-free allowance. Interest below the TDS threshold may still be taxable, depending on your overall income and applicable tax provisions.

What TDS Rate Applies?

For resident bank FD and RD interest, the standard TDS rate is generally 10% when you provide a valid, operative PAN. Once your interest income exceeds the threshold, TDS applies to the full eligible interest, rather than only the amount above the limit.

For example, assume you are below 60, earn ₹60,000 in eligible annual interest at one bank and have no applicable exemption:

The deduction is ₹6,000, rather than ₹1,000 on the ₹10,000 exceeding the threshold. Your final tax liability may differ from this deduction.

Disclaimer: The above calculation is for illustrative purposes only. Ujjivan does not take any responsibility for the accuracy of information provided. Please check with your bank to know your TDS obligations.

When is TDS Deducted?

For eligible deposit interest, deduction generally occurs when interest is credited or paid, whichever happens earlier. Your bank may consider interest expected to be credited or paid during the year when assessing whether the threshold will be crossed.

This means TDS can arise before your deposit matures:

• Interest payout FDs: You may see deductions against periodic interest payments
• Cumulative FDs: TDS can apply when interest is credited or reinvested, even though you receive the proceeds at maturity
• RDs: Interest credited during the deposit term can attract TDS before the final payout

Where tax is recovered from the deposit, it can also affect the amount remaining to compound. Your final maturity proceeds may therefore differ from an estimate calculated without TDS.

Can You Receive Interest Without TDS?

If you meet the below mentioned conditions, you can submit a declaration requesting that eligible interest be paid without TDS. For tax years beginning on or after 1 April 2026, Form 121 replaces Forms 15G and 15H for this purpose.

For a resident individual, the principal conditions are:

• Nil estimated tax liability: Tax on your estimated total income for the year must be nil
• Additional income condition below 60: The aggregate specified income covered by the declaration must not exceed the applicable basic exemption limit ₹50,000 per financial year
• Senior citizen relaxation: If you are a resident aged 60 or above during the year, that additional income ceiling does not apply, but the nil-tax condition remains

Submit the declaration to each relevant bank through its supported process, preferably at the beginning of the tax year or when opening the deposit. Include your valid PAN and renew the declaration for subsequent years where required. A declaration prevents deduction only when you qualify. It does not make otherwise taxable interest exempt.

How Does TDS Affect Your Income Tax Return?

When preparing your return, use your gross interest income before TDS and claim the eligible deduction separately as a tax credit.

For example, if you earn ₹60,000 in interest and the bank deducts ₹6,000, your interest income is ₹60,000. The ₹6,000 represents tax already paid on your behalf.

Your final position depends on your total income and tax calculation:

• If your liability exceeds the available tax credits, you may need to pay the balance
• If the tax already paid exceeds your liability, you can claim the excess as a refund through your return
• If your liability is nil, you may be entitled to a refund of the TDS deducted

Before filing ITR, compare your bank's interest statement and TDS certificate with the tax credit information available through the Income Tax portal.

What Should You Check If the Deduction Looks Incorrect?

You can review the following details before contacting your bank:

• PAN status: Confirm that your PAN is correctly recorded and operative
• Depositor category: Check whether the bank has applied the appropriate senior citizen threshold
• Combined interest: Include all relevant FDs and RDs held with that bank
• Declaration status: Confirm whether an eligible Form 121 was submitted and processed
• Tax records: Compare the deduction shown by the bank with your available tax credit statement

If the bank deducted tax but the credit is missing or incorrect, ask it to review the reporting and submit a correction where necessary. The Income Tax Department advises contacting the deductor to resolve TDS credit mismatches.

Final Thoughts

TDS on FD and RD interest depends on your annual interest, age category, PAN status and eligibility for relief. The move from Section 194A to the relevant provision under Section 393(1) changes the legal reference you will encounter in the new income tax framework.

Keeping your account details updated and checking your interest and tax records helps you account for deductions accurately. Whether the bank deducts TDS or pays your interest without it, your final tax position depends on your total taxable income and the provisions applicable to you.

Disclaimer:

The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user's own risk. Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness of any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.

To know more about Ujjivan Small Finance Bank Products Visit:"https://www.ujjivansfb.bank.in"

All intellectual property rights, including copyrights, trademarks, and other proprietary rights, pertaining to the content and materials displayed herein, belong to Ujjivan Small Finance Bank Limited or its licensors. Unauthorised use or misuse of any intellectual property, or other content displayed herein is strictly prohibited and the same is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person's nationality, residence or otherwise) be contrary to law or registration or would subject Ujjivan Small Finance Bank Limited or its affiliates to any licensing or registration requirements.

Explore Our Products