TDS on FD: Under the new proposal, tax will be deducted from FD and RD income source for the general public only when the income exceeds Rs 50,000. The government has made this change in the bill with the aim of allocating more funds to the middle class and senior citizens.
TDS on FD: Finance Minister Nirmala Sitharaman recently presented Budget 2025. In this budget, significant changes were made in TDS to simplify tax compliance and improve cash flow. The TDS limit on interest income to senior citizens was doubled from Rs 50,000 to Rs 1 lakh. While the general limit was increased to Rs 50,000 for bank interest and Rs 10,000 for other cases.
Under the new change, tax will be deducted from FD and RD income source for the general public only when the income exceeds Rs 50,000. The government has made this change with the aim of allocating more funds to the middle class and senior citizens.
Limit for senior citizens
As per this change, tax deduction for senior citizens will be applicable only if their interest income from savings accounts, fixed deposits (FD), and recurring deposits (RD) exceeds Rs 1 lakh in a financial year. Currently, the limit is Rs 40,000 for the general public, while the limit is Rs 50,000 for senior citizens. This change will be effective from April 1, 2025.
Can be done on the basis of TDS certificate
In India, tax deduction at source (TDS) is a government process that involves deduction of tax at the source of income. When a person (detector) needs to make a specified payment to another person (detector), they have to deduct the tax and deposit it in the account of the central government. The person from whom income tax has been deducted at source is eligible to get credit for the amount deducted, which can be claimed on the basis of Form 26AS or TDS certificate issued by the detector.
Tax Deducted at Source (TDS) on Fixed Deposit refers to the portion of the investor’s premium and interest that the bank withholds on maturity of the FD. The amount is generally calculated based on a set percentage of the final dividend and remitted to the government as tax. Subsequently, it is integrated into the recipient’s income tax records and matched with their unique tax returns. In an effort to streamline tax compliance, the government has made changes to the Tax Deducted at Source (TDS).
- Interest Income: The TDS exemption limit on interest for senior citizens has been increased from Rs 50,000 to Rs 1 lakh. For other individuals, the exemption limit is now Rs 50,000 when the payer is a bank, cooperative society or post office, and Rs 10,000 in other cases.
How is TDS calculated on FD?
- Interest earned on fixed deposits (FDs) is fully taxable and falls under the category of ‘income from other sources’. Tax deduction at source (TDS) on FDs is determined based on the interest income earned during the financial year, taking into account factors such as interest rate, deposit amount, tenure and applicable tax slab.
- If your annual income is less than Rs 2.5 lakh, the bank will not levy any tax on your fixed deposit. However, some financial institutions may require you to submit Form 15G or 15H to avail the tax deduction.
- If the annual interest income from FDs is less than Rs 40,000, it is not subject to TDS. However, if the interest income exceeds Rs 40,000, a TDS of 10 per cent is applicable. Also, if a PAN card is not provided, the bank may withhold 20 per cent of the TDS amount.
- Senior citizens have to follow the same rules as other account holders except that their interest income should be more than Rs 50,000 instead of Rs 40,000.
