TDS on FD interest: thresholds, and Form 15G, 15H or 121

TDS is a prepayment, not the tax

When a bank pays interest on a fixed deposit, it may hold back a slice and send it to the government in your name. That slice is tax deducted at source (TDS). It is not a separate tax. Your FD interest is part of your total income and is taxed at your slab rate; TDS is just the first instalment, which you claim credit for when you file.

This matters because people see "10% TDS" and assume 10% is what they owe. If you are in the 30% bracket, it is not. If your income is below the taxable limit, the TDS is money the government holds that you can recover. Our explainer on tax on FD interest and how to reduce it covers the planning side.

The thresholds, as of October 2026

Budget 2025 raised the limits under section 194A for interest paid by banks, co-operative banks and post offices. For FY 2025-26 onwards:

Three details trip people up:

• The threshold is per bank, adding up all your deposits (and in most cases all branches) with that bank. Spreading ₹10 lakh across three banks can keep each below the limit, but all the interest is still taxable.
• It is a limit on deduction, not on tax. Interest below the threshold is taxable even if the bank deducts nothing.
• The rate is 10% with a PAN. Without a PAN, the deduction is at a higher rate, so keep your PAN updated with every bank.

Recurring deposits and post office deposits fall under the same rule. See the Income Tax Department's TDS resources and the TRACES portal for the official provisions.

Worked example

Assume you hold ₹8 lakh in FDs at one bank at an assumed 7% interest, so interest for the year is ₹56,000. The bank's threshold is ₹50,000, and you are not a senior citizen. Because ₹56,000 is above the limit, TDS at 10% applies on the whole amount, which is ₹5,600. Your 26AS will show it.

Now compare two taxpayers, assuming the new regime. If your other taxable income is ₹9 lakh, the rebate in section 87A (taxable income up to ₹12 lakh) wipes out your tax, so the whole ₹5,600 is a refund claim. If your other taxable income is ₹15 lakh, the ₹56,000 sits in the 15% slab and costs about ₹8,736 with cess, so ₹5,600 is deducted and you pay roughly ₹3,136 more when you file.

That is the case the nil-tax declaration is for.

Form 15G, 15H and now Form 121

If your total income for the year is low enough that you will owe no tax, you can ask the bank not to deduct TDS by giving a declaration before interest is paid or credited.

• Forms 15G (below 60) and 15H (60 and above) were the declarations under the old rules.
• Under the Income-tax Act, 2025 and the rules made under it, applicable from 1 April 2026, Form 121 replaces both. It is a self-declaration under section 393(6) of the new Act, given separately to each payer, with PAN mandatory.

What stays the same:

1. You must be a resident individual (companies, firms and non-residents cannot).
2. Your estimated tax for the year, on your total income, must be nil. This is a test on your whole income, not just the interest.
3. You give it every financial year, to each bank, before interest is credited.
4. Banks report these declarations in their quarterly TDS returns, so they appear in the department's records.

If you declare nil tax but your income actually turns out taxable, the declaration does not excuse you. You owe the tax when you file, and a false declaration can attract penalties. Check the exact eligibility conditions for the form with your bank or the portal before signing.

For a senior citizen under the new regime, the rebate in section 87A can reduce the tax to nil at quite high incomes, so many seniors with only pension and FD interest qualify. Use the income tax calculator first.

Claiming credit and getting refunds

Whatever the bank deducted appears in your Form 26AS and AIS. Before you file, match it against your bank's interest certificate. Our guide to Form 26AS, AIS and TIS explains how to do that. Include the full interest as income (not just the TDS amount) and claim the TDS as credit. If TDS exceeded your tax, the excess comes back as a refund after you file your return.

The TDS calculator and the FD calculator help estimate how much interest and deduction to expect, and our advance tax and TDS guide shows where TDS fits in the larger picture.

Common slips to avoid

Assuming no TDS means no tax. If you keep each bank's interest under the threshold, nothing is deducted, but every rupee is still taxable and should be in your return. AIS will show it either way.

Forgetting to renew the declaration. A nil-tax declaration covers one financial year. Submit it again each April, before the first interest credit, or the bank will start deducting.

Not telling every bank. If you have FDs at three banks, submit the declaration to all three. Giving it to one does nothing for the others.

Mixing up the PAN. A missing or invalid PAN leads to a higher TDS rate. Check that the PAN on every bank profile is correct.

Skipping the certificate. Ask for the interest and TDS certificate (Form 16A) when the bank issues it and match it with your 26AS before filing.

This article is for education only and is not tax advice. Thresholds, forms and section numbers change; verify current rules on incometax.gov.in or with your bank before acting.