FD interest is fully taxable in India — at your income tax slab rate. For a 30%-slab earner, ₹1 lakh of FD interest costs ₹31,200 in tax. Here's how TDS works, when Form 15G/15H saves you tax, and why the "tax-saver FD" isn't quite as tax-saving as the name suggests.
The basic rule
- FD interest is reported under "Income from Other Sources" in your ITR
- Taxed at your applicable income tax slab rate (5% / 10% / 15% / 20% / 25% / 30% based on slab + 4% cess)
- No special exemption like equity LTCG's ₹1.25L threshold — every rupee of FD interest is taxable
- Exception: NRE FD interest is tax-free under Section 10(4)(ii)
When TDS is deducted
| Threshold | Under 60 | 60+ (senior citizen) |
|---|---|---|
| TDS triggered if interest per bank per FY exceeds | ₹40,000 | ₹50,000 |
| TDS rate | 10% if PAN linked; 20% if not | Same |
| How to avoid TDS (if total income below taxable limit) | Submit Form 15G | Submit Form 15H |
Real tax math — ₹10 lakh FD, 1 year
| Scenario | FD interest @ 7% | Slab tax | TDS deducted | Net interest |
|---|---|---|---|---|
| Total income ₹15L (30% slab) | ₹70,000 | ₹21,840 (incl. cess) | ₹7,000 (TDS @ 10%) | ₹48,160 |
| Total income ₹8L (20% slab) | ₹70,000 | ₹14,560 | ₹7,000 | ₹55,440 |
| Total income ₹4L (5% slab) | ₹70,000 | ₹3,640 | ₹7,000 (refundable via ITR) | ₹66,360 |
| Total income ₹2L (below exemption) | ₹70,000 | ₹0 | ₹0 (with Form 15G) | ₹70,000 |
| Senior citizen total income ₹3L (below exemption) | ₹70,000 | ₹0 | ₹0 (with Form 15H) | ₹70,000 |
Form 15G / 15H process
If your total taxable income is below the basic exemption limit (₹2.5L under-60 / ₹3L 60-79 / ₹5L 80+), you can prevent TDS deduction:
- Log into your bank's net banking
- Navigate to "Tax Center" → "Form 15G/15H Submission"
- Select form (15G under-60 / 15H 60+)
- Confirm: PAN + estimated FD interest + total estimated income
- Submit — bank stops TDS for the FY
Important: submit fresh every financial year (April-May). Submit at EACH bank where you hold FDs (not centralized).
Tax-saver FD (Section 80C) — what it actually saves
| Aspect | Tax-saver FD | PPF | ELSS Mutual Fund |
|---|---|---|---|
| Tax deduction on principal | Up to ₹1.5L (80C) | Up to ₹1.5L (80C) | Up to ₹1.5L (80C) |
| Interest tax-free? | NO — taxed at slab | YES — fully exempt | LTCG taxed at 12.5% (₹1.25L exemption) |
| Maturity tax-free? | Principal yes (already taxed), interest no | YES — fully exempt | LTCG tax applies |
| Lock-in | 5 years | 15 years | 3 years |
| Returns (2026) | ~6.50-7.25% pre-tax | 7.10% (Q1 FY26) | ~12-15% long-term equity |
Tax-saver FD is the least efficient 80C option. PPF (tax-free maturity) and ELSS (higher long-term returns) usually win.
How to report FD interest in ITR
- Use ITR-1 or ITR-2 (depending on income type)
- Report under "Income from Other Sources" → "Interest from Banks / Post Office"
- The bank issues a TDS Certificate (Form 16A) every quarter
- Cross-check Form 16A with your Form 26AS (income tax department's tax credit statement)
- Adjust TDS already deducted against your final tax liability
For our complete FD guide including rate comparison + premature withdrawal + 5-year tax-saver options, see /fixed-deposits.
Sources: Income Tax Act 1961 — Section 56 (Other Sources), Section 80C (deductions), Section 194A (TDS on interest); CBDT FAQs on TDS Form 15G/15H; bank tax-saver FD product documents verified May 2026.
Frequently Asked Questions
Is FD interest taxable in India?
Yes — interest earned on fixed deposits is FULLY TAXABLE under 'Income from Other Sources' at your applicable income tax slab rate. There is NO exemption like there is for PPF or NRE FD (which are tax-free). For a person in the 30% slab, ₹1 lakh of FD interest costs ₹30,000 in tax (plus 4% cess = ₹31,200). Tax-saver FDs under Section 80C give a ₹1.5L deduction for the PRINCIPAL invested (with 5-year lock-in) — but the interest is still taxable each year.
When is TDS deducted on FD interest in India?
TDS (Tax Deducted at Source) at 10% applies if interest paid by ONE bank in a financial year exceeds ₹40,000 (₹50,000 for senior citizens aged 60+). TDS is calculated on the gross interest, deducted by the bank, and reflected in your Form 26AS. If your total taxable income is below the basic exemption limit (₹2.5L for under-60s, ₹3L for 60-79, ₹5L for 80+), you can submit Form 15G (under-60) or 15H (60+) at the start of the FY to PREVENT TDS deduction.
What's the difference between Form 15G and Form 15H?
Both are self-declarations stating that your total taxable income is below the basic exemption limit, so the bank should NOT deduct TDS on your FD interest. Form 15G is for individuals UNDER 60. Form 15H is for SENIOR CITIZENS 60+ (with simpler eligibility criteria). Submit fresh forms every financial year (April-May) at each bank where you hold FDs. The form is submitted online via bank's net banking → 'Tax Center' → '15G/15H Submission'. Submit BEFORE the bank's quarterly TDS deduction window (typically March 25th, June 25th, September 25th, December 25th).
Does the 5-year tax-saver FD make FD interest tax-free?
No. The 5-year tax-saver FD (under Section 80C) gives you a deduction on the PRINCIPAL invested (up to ₹1.5 lakh as part of your overall 80C limit). The INTEREST you earn on this FD is still fully taxable every year at your slab rate. So while you save tax on the initial investment, you don't save tax on the returns. Net effective tax-saving: ~30-31% on the ₹1.5L principal in the year of investment (~₹45-46K tax saved), but you'll pay tax on the ₹50K-1L annual interest for 5 years. PPF / EPF / ELSS / SCSS are more tax-efficient instruments because they're EEE (Exempt-Exempt-Exempt) — principal + interest + maturity all tax-free.
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