TDS on Fixed Deposit Interest: Section 194A, Form 15G/15H Explained

Banks are required to deduct tax at source (TDS) on the interest they pay you on a fixed deposit, under Section 194A of the Income Tax Act — and the rule catches a lot of people off guard because it isn't tied to your overall taxable income at all. A retiree with no other taxable income and a student with a small FD funded by pocket money can both have TDS deducted on their FD interest, simply because the interest amount crossed the threshold — the fix, in both cases, is the same form, but it's one most people don't know exists until they notice a smaller-than-expected interest credit.

The threshold: when does TDS actually kick in

A bank must deduct TDS on FD interest once the total interest it pays you across all your fixed deposits with that bank (not per branch, and not per individual FD) crosses ₹40,000 in a financial year for a regular taxpayer, or ₹50,000 for a senior citizen (60 years or older). This is a bank-wide threshold, not a per-deposit one — someone with five separate FDs at the same bank has their interest from all five added together to check against the limit, even if each individual FD's interest is well under ₹40,000 on its own.

The TDS rate, and what happens without a PAN

Once the threshold is crossed, the bank deducts TDS at 10% of the interest amount, provided your PAN is on record with the bank. If your PAN isn't linked to the FD account, the bank is required to deduct TDS at a much higher rate — 20% — specifically as a disincentive for not providing PAN details, since the tax department otherwise has no straightforward way to track that interest income against a specific taxpayer. Linking your PAN to every bank account and FD, well before this becomes an issue, is a simple, one-time step that avoids a meaningfully worse deduction rate.

TDS deducted doesn't mean tax is actually owed

This is the single most important thing to understand about TDS on FD interest: the bank deducts a flat 10% (or 20% without PAN) regardless of your actual tax slab. If your total income for the year falls in the 5% slab, or is below the taxable threshold entirely, the bank still deducts the same 10% — because the bank has no visibility into your total income from other sources, your deductions, or your applicable slab. TDS is simply an upfront collection mechanism; your actual tax liability is calculated properly only when you file your income tax return, and any excess TDS deducted beyond what you actually owe is refunded to you at that point.

Form 15G and Form 15H — how to stop TDS before it happens

If your total income for the year is genuinely below the basic taxable threshold, you don't have to wait for a refund after the fact — you can submit a declaration to the bank asking it not to deduct TDS in the first place. Form 15G is for individuals below 60 years of age (and HUFs) whose total estimated tax liability for the year is nil. Form 15H is the equivalent form specifically for senior citizens (60 and above), with a materially easier condition to meet — it only requires that the person's total tax liability for the year be nil, without the additional total-income ceiling that Form 15G technically also references for very young or low-income filers.

• Who can submit Form 15G: any resident individual (or HUF) below 60 years old whose total estimated tax for the year is nil, and whose total interest income for the year doesn't exceed the basic exemption limit.
• Who can submit Form 15H: any resident senior citizen (60+) whose total estimated tax for the year is nil — a materially simpler test since it isn't tied to a specific income ceiling the way 15G nominally is.
• When to submit: at the start of the financial year, or immediately when opening a new FD — submitting it after TDS has already been deducted for part of the year doesn't undo deductions already made, only prevents further ones.
• Where to submit: directly with each bank where you hold an FD — the declaration is bank-specific, so holding FDs at three banks means submitting the form at each of the three, not once centrally.
• Validity: for one financial year only — it needs to be resubmitted at the start of every new financial year, even if your income situation hasn't changed.

What if TDS was already deducted and you didn't owe tax?

If TDS was deducted on your FD interest during the year but your actual tax liability, once everything is calculated (all income sources, all deductions, the applicable slab), turns out to be lower than what was deducted — or nil — the only way to get that money back is by filing an income tax return for the year and claiming a refund of the excess TDS. This is exactly the scenario Form 15G/15H exists to prevent proactively, but if the window to submit it has passed or was missed, filing a return specifically to claim the TDS refund is still the correct, complete remedy — the money isn't lost, it just requires the filing step to be recovered.

How to check how much TDS has actually been deducted

The interest certificate or TDS certificate (Form 16A, issued quarterly by the bank) shows the exact interest paid and TDS deducted for a specific period. For a consolidated, cross-bank view, Form 26AS and the Annual Information Statement (AIS), both available on the income tax e-filing portal, show every TDS deduction reported against your PAN by every deductor — every bank, every employer, anyone required to deduct tax at source on a payment to you — in one place. Cross-checking the AIS/Form 26AS figures against your own bank statements before filing is worth doing every year, since a bank occasionally reports interest or TDS incorrectly, and catching that before filing avoids a mismatch notice later.

Cumulative vs simple FDs — does the FD type affect TDS timing

A cumulative (compounding) FD pays out all its interest at maturity rather than periodically, while a simple-interest FD pays interest at regular intervals (monthly, quarterly, annually) during the term. TDS, however, is deducted based on interest accrued during the financial year, not interest actually paid out — meaning a bank deducts TDS annually on a cumulative FD's accrued interest even though the depositor hasn't received any cash yet, based on the interest that has accrued and would be taxable in that year regardless of payout timing. This occasionally surprises people who assume a cumulative FD defers the TDS question entirely until maturity — it doesn't; only the actual cash payout is deferred, not the tax treatment of the accruing interest.

NRO fixed deposits — a different, higher TDS rate applies

The 10%/20% TDS rates and the ₹40,000/₹50,000 thresholds described above apply to resident Indians' fixed deposits. NRO (Non-Resident Ordinary) fixed deposits held by NRIs are subject to a materially higher TDS rate — typically 30% plus applicable surcharge and cess — with no equivalent low-threshold exemption, since Form 15G/15H generally cannot be submitted by non-residents. NRE (Non-Resident External) fixed deposits, by contrast, earn interest that's fully tax-exempt in India and therefore carry no TDS at all. Confusing NRO and NRE tax treatment is a common and expensive mistake for NRIs choosing where to park funds — the account type alone determines a dramatically different tax outcome.

Step-by-step: avoiding or reclaiming FD TDS

1. Estimate your total income for the year, across all sources, before the financial year starts or as early as possible within it.
2. If your total tax liability for the year is genuinely nil, submit Form 15G (below 60) or Form 15H (60+) at every bank where you hold an FD, at the start of the year.
3. If a new FD is opened partway through the year, submit the relevant form at that time too — it isn't automatically covered by a form submitted for a different, pre-existing FD at the same bank.
4. Resubmit the form at the start of every new financial year — it doesn't carry forward automatically.
5. If TDS was still deducted (form wasn't submitted in time, or wasn't eligible), collect the Form 16A / check Form 26AS and AIS for the exact TDS amount.
6. File your income tax return for the year, reporting the FD interest as income and the TDS already deducted as tax already paid — any excess is refunded after processing.

A worked example

A 45-year-old with ₹6 lakh in fixed deposits at one bank, earning 7% annually, would generate roughly ₹42,000 in interest in a year — just over the ₹40,000 threshold, triggering 10% TDS (₹4,200) even though their total income, after standard deductions and exemptions, might fall well within the tax-free range under the old regime, or the lower slabs under the new one. If their total tax liability for the year is genuinely nil, submitting Form 15G at the start of the year prevents that ₹4,200 from being deducted in the first place. If they missed submitting it, they'd need to file a return to claim that ₹4,200 back as a refund — recoverable, but requiring an extra step that timely Form 15G would have avoided entirely.

Common mistakes people make with FD TDS

• Assuming the ₹40,000 threshold applies per FD rather than per bank, and being surprised when TDS is deducted despite each individual FD's interest looking small.
• Not linking PAN to an FD account, resulting in a 20% TDS deduction instead of 10%.
• Submitting Form 15G/15H only once and assuming it carries forward to future years without resubmission.
• Assuming TDS not being deducted (because the threshold wasn't crossed, or interest is spread across multiple banks) means the interest income itself isn't taxable — it always is, regardless of TDS.
• Not checking Form 26AS/AIS before filing, and missing a TDS credit that should have reduced the final tax payable or increased the refund.
• Confusing NRE and NRO fixed deposit tax treatment, which are entirely different (tax-free vs a much higher TDS rate).

How this interacts with the old vs new tax regime

TDS deduction on FD interest happens identically regardless of which regime you eventually file under — the bank has no way of knowing your regime choice at the time interest is credited, so it applies the same flat 10%/20% rule either way. What changes between regimes is only what happens afterward, at filing: the new regime taxes the full FD interest at its slab rates with no special deduction for it, while the old regime treats it the same way but also lets you offset it against other deductions (80C, 80D, HRA) that might bring your overall liability, and therefore your eventual refund or additional payment, down further. Someone deciding between regimes with meaningful FD interest income should run both scenarios through an income tax calculator with the actual interest figure included, rather than assuming FD interest itself tips the decision either way — it's taxed as "income from other sources" under both regimes, just netted against a different set of deductions.

FD interest and advance tax — a related obligation people miss

Separately from TDS, if your total tax liability for the year (after accounting for whatever TDS was deducted) exceeds ₹10,000, you're required to pay advance tax in instalments during the year rather than waiting to settle everything at filing time — and FD interest is a common reason someone crosses that threshold without realising it, especially if TDS wasn't deducted at all (interest spread across multiple banks, each under its own ₹40,000 threshold) or was deducted at a rate lower than your actual slab. Failing to pay adequate advance tax when required attracts its own interest penalty under Sections 234B and 234C, independent of whether the underlying tax itself was eventually paid correctly at filing — someone with substantial FD interest income and a higher tax slab should specifically check this rather than assuming TDS (or its absence) settles the full picture on its own.