How Tax deduction on FD is calculated

The interest that you earned on a fixed deposit is taxable and dependent on different income tax slabs of individual earning interest; this varies from person to person. The income tax slab rates lie between 0% and 30% and the tax levied on fixed deposits is influenced by the income earned by the taxpayer in that particular year. There are tax saving FD rates that can help minimize the burden on your finances. Here is how tax deduction on fixed deposits works:

Tax Deducted at Source (TDS) on Fixed Deposits:

The TDS associated with the interest on fixed deposits is deducted by banks at the rate of 10% if the amount paid or to be paid is over RS.10,000. The limit is set at that amount per branch of that bank, for each individual. Thus, the TDS is deducted by the branch only if the amount paid from one single branch as interest is over Rs.10,000, even if cumulatively, the individual may receive more overall interest from their various FDs.

When the time to pay the interest comes, the bank will deduct the tax from your interest earnings, prior to depositing the rest in your account.

In case, the TDS deducted is lesser than your tax liability, you must pay the amount that is left.  In the event that the deducted TDS is more than your tax liability then you can claim a refund.

If the interest owed by the bank is over Rs. 10,000 and the individual has not submitted their Permanent Account Number (PAN), TDS will be deducted at a rate of 20% as per section 206AA of the Income Tax Act. This step acts as an incentive for all individuals to submit their PAN details as most do not want to miss out on tax saving FD rates.

No TDS deduction on Fixed deposits:

In a case where an individual’s total tax liability is zero but TDS is still deducted by the bank due to the interest payout exceeding RS.10,000 from one branch, the individual is considered eligible for a refund. Forms 15H and 15G introduced by the Government eases the process of filing for a refund, and the declaration forms are valid for the duration of one year. Every year, a new form must be submitted for zero or low TDS deduction on the interest earned on fixed deposits.


Along with TDS there are other forms of tax deduction on fixed deposits. For example, investors who are senior citizens can claim tax deduction on fixed deposits that have a lock-in period of five years according to section 80C of the Income Tax Act. Essentially, it’s important to assess all the available options with regards to fixed deposits and tax saver FD interest rates, as well as your own IT slabs while planning your finances, and you can do this with the help of FD tax calculator on the bank’s website. This is where Finserv MARKETS can come to your aid; a platform that is designed to attend to all your investment needs. Finserv MARKETS offers you a diverse range of financial solutions from the best providers in India, from which you can choose the fixed deposit that best suits your requirements and preferences.

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