FD Interest TDS Section 194A + Form 121 (2026-27)

Key decisions

1. Q1

   What is the ₹40K / ₹50K threshold actually based on — and per bank or per FD?

   PER BANK PER FY threshold, NOT per FD or per branch. Bank aggregates ALL your FD interest across ALL branches + ALL FDs in that bank under your PAN. (1) GENERAL THRESHOLD: ₹40,000/year (raised from ₹10,000 in 2019). (2) SENIOR CITIZEN (60+) THRESHOLD: ₹50,000/year (raised from ₹10,000 in 2019). (3) EXCEEDING THRESHOLD: bank deducts 10% TDS at credit (not maturity) — for cumulative FDs, on accrued interest annually. (4) NO PAN: TDS rate jumps to 20% (compounding penalty). EXAMPLE: 6 FDs at SBI totaling ₹6L principal yielding ₹42K interest in FY → TDS = ₹4,200 (10% on entire ₹42K). Per-BANK aggregation means: 6 FDs at SBI + 4 FDs at HDFC = bank-by-bank threshold; can deploy ₹5L at each of 4 banks (₹35K each) to stay below threshold without forming taxable triggers. SPLIT RECORD: if you intentionally split across banks to dodge TDS but total interest > ₹2.5L exemption, IT department aggregates from 26AS / AIS — you owe self-assessment tax. TDS dodging is OK; tax dodging is not.

2. Q2

   Form 15G vs 15H vs new Form 121 — what changed in 2026-27?

   BEFORE FY 2026-27: TWO FORMS. (1) Form 15G — for general residents below 60 with total income below taxable limit (₹2.5L). Self-declaration to bank to skip TDS. (2) Form 15H — for senior citizens (60+) with total income below taxable limit (₹3L for 60-79; ₹5L for 80+). Self-declaration to skip TDS. EFFECTIVE FY 2026-27 (Income Tax Rules 2026 amendment): UNIFIED FORM 121 — combines both. Single form covers ALL self-declarants regardless of age. Age + income criteria same as before but submitted on unified form. WHO SUBMITS: residents only (NRIs cannot — must use DTAA + treaty rate via separate process). WHEN TO SUBMIT: BEFORE first interest credit of the FY (typically Apr 1-15). Bank must process within 7 days. WHERE: physically at branch OR via net banking (most banks support digital submission since 2024). VALIDITY: 1 FY only — submit fresh every April. PENALTY FOR FALSE DECLARATION: Section 277 (perjury) + ₹10K-₹1L fine + prosecution risk. KEY: do NOT submit if total income exceeds taxable limit — TDS skipped + you still owe tax + 1% interest under Section 234B.

3. Q3

   How to legally minimize TDS impact on FD interest — 4 strategies?

   (1) BANK SPLITTING (legal): split FDs across 4-5 banks so per-bank interest stays under ₹40K/₹50K threshold. Each bank's ₹5L FD at 7% = ₹35K interest, under threshold. NO TDS deducted. NOT TAX EVASION as long as you self-declare total income in ITR. (2) FAMILY MEMBER DISTRIBUTION (legal): gift ₹X to spouse/adult-child/parent (no gift tax via Section 56(2) family exemption); they hold FD in own name with own PAN. Their income (often below threshold) bears the tax. Crucial: clubbing provisions Section 64(1)(iv) apply to spouse FD interest — interest taxable in YOUR hands even though FD is in spouse's name. AVOID spouse; use ADULT CHILDREN (over 18) or PARENTS (no clubbing). (3) FORM 121 SUBMISSION (legal): if your total income is below taxable limit, submit Form 121 in April. Bank skips TDS even on ₹2L+ FD interest. Use only if genuinely below threshold. (4) CUMULATIVE FD TIMING (legal): cumulative FDs accrue interest annually for TDS purposes (not at maturity). 3-year FD at 7% on ₹10L → ₹73K interest year 1, ₹78K year 2, ₹84K year 3. TDS deducted each year. Cannot defer to maturity; this is governed by accrual basis. NON-CUMULATIVE / QUARTERLY PAYOUT FDs: actual interest credit triggers TDS — sometimes useful for income planning.

4. Q4

   What about NRI FDs — NRO vs NRE vs FCNR TDS treatment?

   RADICAL difference between NRI account types. (1) NRO FD: interest is TAXABLE in India + TDS @ 30% (plus surcharge + cess = ~31.2%) deducted at source. Cannot submit Form 121 (NRIs not eligible). Reduce via DTAA — country-specific tax treaty between India + your country of residence may give 10-15% reduced rate. Process: submit Form 10F + Tax Residency Certificate (TRC) + PAN to bank annually. India-US DTAA = 15%; India-UK = 15%; India-Singapore = 15%; India-UAE = 12.5%. (2) NRE FD: interest is TAX-EXEMPT in India under Section 10(4)(ii). ZERO TDS. Cannot be claimed against Indian income (no deduction). (3) FCNR(B) DEPOSITS (Foreign Currency Non-Resident): interest TAX-EXEMPT in India + ZERO TDS. Denominated in USD/GBP/EUR/JPY/AUD/CAD — currency risk borne by depositor. (4) RFC (Resident Foreign Currency) — for returning NRIs; interest tax-exempt for 1-2 years post-return then becomes taxable. SUMMARY: NRE + FCNR = best for foreign earnings; NRO = needed for Indian-source income but bears 30% TDS unless DTAA reduces.

5. Q5

   What if TDS was wrongly deducted — refund process + Form 26AS verification?

   REFUND PATH if TDS deducted but your total income is below taxable limit. (1) FILE ITR-1 (Sahaj) for the FY in which TDS was deducted. Declare all income (FD interest + others) + claim Section 80 deductions. Software auto-computes tax payable = ₹0; TDS already paid = refundable. (2) VERIFY in Form 26AS / AIS-TIS at incometax.gov.in: bank reports TDS quarterly via Form 26Q; should appear in your 26AS within 60 days of deduction. (3) ITR PROCESSING: 30-90 days post filing. Refund credited to your bank account directly + intimation under Section 143(1) sent. (4) DELAYED REFUND: file grievance via incometax.gov.in or call CPC. SBI / large banks delays are rare; smaller banks / cooperative banks sometimes miss TDS deposit deadlines = your 26AS doesn't show TDS = refund stuck. COMMON ERRORS: (a) PAN-Aadhaar link mismatch → bank deducts 20% TDS instead of 10% — refund only by filing ITR. (b) Mistaken senior-citizen claim — if you turned 60 mid-FY, you get ₹50K threshold for whole FY. Banks sometimes apply old ₹40K threshold; reclaim difference via ITR. (c) Section 80TTB for seniors (₹50K deduction on interest income from all sources combined) — often missed in ITR; review carefully.

Top institutions + reference rates

Source: RBI / DICGC / IT Dept / bank rate cards · FY 25-26 · refreshed quarterly