Synopsis: FD interest is fully taxable and must be reported under “Income from Other Sources” in the ITR for FY 2025-26, due July 31, 2026. This article breaks down where to check the FD interest income, how they are taxed, TDS on FD interest and how to avoid TDS.
Any earned interest on fixed deposits during FY 2025-26 has to be declared in the income tax return, which is due on July 31, 2026 for salaried individuals and pensioners not requiring an audit. FD interest is fully taxable, and banks report it directly to the tax department and any mismatch caused between the declaration by the tax payer and the bank which has already reported can trigger a query or notice. Here’s a complete breakdown of how FD interest is taxed, where to verify the exact amount, and how TDS rules work this year.
Where to Check FD Interest Income
- Bank statements or FD certificates from each bank where the deposits are held
- Form 26AS, which shows tax deducted at source against the PAN
- Annual Information Statement (AIS) and Taxpayer Information Statement (TIS), both accessible on the income tax e-filing portal
Since multiple FDs across different banks are common, cross-checking AIS against all the bank records helps identify any discrepancy before filing.
How FD Interest Is Taxed and Where It Goes in the ITR
FD interest falls under “Income from Other Sources” in the ITR form. Under the old tax regime, a five-year tax-saving fixed deposit’s principal invested, is eligible for deduction under Section 80C, within the overall ₹1.5 lakh limit that also covers PF, ELSS, life insurance premiums, and other eligible investments. It’s worth noting this deduction applies only to the principal in a five-year tax-saver FD, regular FD interest itself doesn’t qualify for any deduction under 80C.
Extra Deduction for Senior Citizens
Resident senior citizens who opt for the old regime get an additional benefit under Section 80TTB, a deduction of up to ₹50,000 on interest earned from savings accounts, fixed deposits, and recurring deposits combined. So if total interest income is ₹35,000, that’s the maximum you can claim, not the full ₹50,000.
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TDS on FD Interest: Current Thresholds
Under Section 194A, banks are required to deduct TDS on FD interest once it crosses a threshold:
- ₹50,000 in a financial year for resident individuals below 60 years of age
- ₹1 lakh in a financial year for resident senior citizens above 60 years of age
- 20% flat TDS if PAN isn’t linked with the bank, regardless of the amount
- The standard TDS rate where PAN is available is 10%.
How to Avoid TDS If Income Isn’t Taxable
If your total income for FY 2025-26 falls below the basic exemption limit, taxpayers can ask the bank not to deduct TDS at all by submitting a self-declaration form. Both forms are available only to Indian residents.
- Form 15G – for individuals below 60 years and HUFs
- Form 15H – for senior citizens aged 60 and above
For the income tax slabs, under the old regime, the basic exemption limit is ₹2.5 lakh for individuals below 60, and ₹3 lakh for senior citizens. Under the new regime, the exemption limit is ₹4 lakh for all taxpayers, and with Section 87A rebate, total taxable income up to ₹12 lakh effectively has no tax.
Things to Note
Form 15G and 15H are being consolidated into a single, age-neutral Form 121 under the Income-tax Act, 2025, but that change takes effect from April 1, 2026, applicable to FY 2026-27 (Tax Year 2026-27) onward. For the return that is filed now, covering FY 2025-26, Form 15G and Form 15H remain the correct forms to use. If your bank’s portal still shows these two forms rather than Form 121, that’s expected and not an error as Form 121 will apply only while submitting a fresh TDS declaration for the new financial year.
Quick Checklist Before You File
- Match the FD interest across bank statements, Form 26AS, and AIS
- Report the full interest amount under “Income from Other Sources,” even if TDS was already deducted
- Claim Section 80TTB for a senior citizen under the old regime, capped at actual interest earned
- Use Form 15G/15H (not Form 121) for any fresh TDS declarations this filing season
- File by July 31, 2026 to avoid late fees under Section 234F and loss of certain carry-forward benefits
