Tax on Fixed Deposits, Savings and Debt Funds

How interest from bank deposits and savings accounts is taxed, when banks deduct TDS, and how to avoid unnecessary deductions with Forms 15G and 15H.

Interest from fixed deposits, recurring deposits and savings accounts is taxable as income at your slab rate.

TDS on deposits

Banks deduct TDS on fixed deposit interest if it exceeds a threshold in a year. The thresholds were raised in the 2025 budget, to 50,000 rupees for most people and 1 lakh rupees for senior citizens. TDS is typically 10 percent if you’ve given your PAN.

Forms 15G and 15H

If your total income is below the taxable limit, you can submit:

Form 15G (for people under 60).
Form 15H (for senior citizens).

This asks the bank not to deduct TDS.

Savings account interest

Under the old regime, interest from savings accounts is deductible up to 10,000 rupees. Senior citizens can deduct up to 50,000 rupees of interest from deposits.

Common mistakes

Not reporting FD interest, assuming TDS settles it. If your slab rate is higher than 10 percent, you owe more tax.
Ignoring interest accrued but not yet paid on cumulative FDs, which is generally taxable each year.

Debt mutual funds

Gains on debt funds bought after April 2023 are taxed at slab rates when you sell, like FD interest, but only when you redeem, which can defer tax.

Tax-efficient alternatives

PPF interest is tax-free.
Tax-free bonds, where available.
Equity investments with lower long-term tax rates, though with more risk.

The underpaid tax

A retired teacher in the 30 percent tax bracket earns 2 lakh rupees in FD interest. The bank deducts 10 percent TDS. She must pay the remaining tax when filing her return, or face interest and notices.

Thinking TDS means your tax is fully paid

TDS is often 10 percent; if your slab rate is higher, you owe more.

Key takeaways

FD and savings interest is taxed at slab rates.
Banks deduct TDS above thresholds, raised in 2025.
Forms 15G and 15H can stop TDS if income is below taxable limits.
Report all interest, as TDS may not cover your full tax.