Your bank deducts tax when your interest crosses a threshold. That money is not lost, and the declaration that stops the deduction only works if your tax for the year is genuinely nil. Here is exactly how both sides of it work.
Quick snapshot
- TDS on fixed deposit interest is not an extra tax. It is advance collection you claim back in your return.
- Threshold where a bank, co-operative society or post office must deduct: Rs 1,00,000 for a senior citizen and Rs 50,000 for everyone else in a year.
- The threshold is counted across all your deposits in that bank, not per FD and not per branch.
- No PAN with the bank means a higher rate of deduction. From the 2025-26 Budget, the higher-rate rule applies only in non-PAN cases.
- Form 15G was for residents under 60; Form 15H for residents aged 60 and above.
- Under the Income-tax Act, 2025 the declaration sits in section 393(6), and the new rules merge 15G and 15H into a single form.
- A declaration filed when you do have taxable income is a false declaration, not a shortcut.
A bank, co-operative society or post office must deduct tax at source on your interest once the interest it pays you in a year crosses Rs 1,00,000 if you are a senior citizen, or Rs 50,000 if you are not. The deduction is at the rates in force and is credited to your PAN, so you set it off against your tax when you file your return and get the balance refunded. You can stop the deduction in advance by filing a declaration under section 393(6) of the Income-tax Act, 2025 — the form long known as Form 15G (below 60) or Form 15H (60 and above) — but only if the tax on your estimated total income for the year will actually be nil.
1. What TDS on FD interest actually is
Start here, because almost every complaint about FD tax comes from getting this one point wrong.
TDS stands for tax deducted at source. When your bank credits interest on your fixed deposit, it withholds a slice and deposits that slice with the government against your PAN. The bank is acting as a collection agent, not as a tax authority. The amount withheld is your tax, paid early.
Three consequences follow, and all three matter:
- TDS is not the final tax on your FD. Interest on a fixed deposit is fully taxable as income. If your slab rate works out higher than the deduction, you owe the difference. If it works out lower, or if you owe nothing at all, you claim the excess back.
- TDS being deducted does not mean you can skip the return. The deduction only becomes a credit when you report the interest and claim the credit in your income tax return.
- Interest is taxable in the year it accrues, not only in the year you break the deposit. A five-year FD does not park its tax for five years. Banks credit and report interest annually, which is why TDS appears every year even on a deposit you have not touched.
So the honest framing is this: the bank deducting tax on your FD interest is mildly annoying for cash flow and completely neutral for your total tax bill. The only people genuinely worse off are those whose tax for the year is nil — because for them the money sits with the government until they file and claim a refund. That is precisely the problem the declaration form exists to solve.
2. The thresholds: when a bank must start deducting
The thresholds were raised in the 2025-26 Budget and the raised figures carry into the Income-tax Act, 2025. The table below shows the change, because a lot of older material still quotes the pre-2025 numbers.
| Who is paid / by whom | Earlier threshold | Threshold now |
|---|---|---|
| Senior citizen — interest from a bank, co-operative society or post office | Rs 50,000 | Rs 1,00,000 |
| Any other person — interest from a bank, co-operative society or post office | Rs 40,000 | Rs 50,000 |
| Interest in other cases (not a bank, co-operative society or post office) | Rs 5,000 | Rs 10,000 |
| Interest on securities | Nil (no threshold) | Rs 10,000 |
The Finance Minister's own words in the Budget speech were that "the limit for tax deduction on interest for senior citizens is being doubled from the present Rs 50,000 to Rs 1 lakh", with the stated aim of reducing the number of small transactions pulled into TDS.
Two details people miss:
- The threshold is about the interest, not the deposit. A Rs 5 lakh FD and a Rs 50 lakh FD are treated the same way; what is tested is the interest the bank pays you in the year.
- Crossing the threshold does not make only the excess taxable. Once you cross it, the deduction applies to the interest paid, not merely to the part above the line. The threshold decides whether the bank deducts, not how much of your income is taxable. All of your interest is taxable income either way.
What rate applies
The Act prescribes deduction at the rates in force for interest paid by a bank, co-operative society or post office. Rates in force are set by the relevant Finance Act each year, so the correct practice is to read the current year's TDS rate chart on the Income Tax Department's site rather than rely on a figure in an article. We are deliberately not printing a percentage here, because a stale rate is worse than no rate.
What we can state plainly is the PAN rule. If the bank does not have your PAN, a higher rate of deduction applies, and the 2025-26 Budget narrowed the higher-rate provisions so that they "will now apply only in non-PAN cases". Practical translation: keep your PAN seeded and verified with every bank where you hold a deposit, and keep it linked to Aadhaar so it does not go inoperative. A PAN that has gone inoperative is treated as a PAN not furnished.
3. How the bank adds up your interest
This is where people are genuinely caught out, so it deserves its own section.
The threshold is applied payer-wise. The payer is the bank, not the branch. If you hold three FDs at three different branches of the same bank, the bank aggregates the interest on all three and tests the total against the threshold. Splitting a deposit across branches of one bank does nothing.
Splitting across different banks does have an effect, because each bank tests only what it pays you. But it is a cash-flow trick, not a tax saving:
What splitting across banks does
- Each bank may stay below its threshold, so less tax is withheld during the year.
- Useful if your total tax really is nil and you would rather not wait for a refund.
- Nothing is hidden — every bank still reports the interest against your PAN.
What it does not do
- It does not reduce your taxable income by a single rupee.
- It does not remove your duty to report all the interest in your return.
- It leaves you with more accounts, more statements and more chances to miss one.
Also note that for a joint FD, the deduction is normally against the first holder's PAN, and the interest is taxable in the hands of the person whose money it is. Who signed first on the form does not decide who owns the income.
4. Form 15G and Form 15H: who can file which
Both forms do the same job — they are declarations that tell the bank your tax for the year will be nil, so it should not deduct. The split between them was purely about age.
| Point | Form 15G | Form 15H |
|---|---|---|
| Who files it | Resident individual below 60, and certain non-individual residents such as HUFs and trusts | Resident individual aged 60 or more at any time during the year |
| Residency | Must be resident in India | Must be resident in India |
| Core condition | Tax on estimated total income for the year must be nil and the total of the incomes on which TDS applies must not exceed the maximum amount not chargeable to tax | Tax on estimated total income for the year must be nil |
| Effect of the second condition | Interest above the basic exemption limit disqualifies you even if a rebate would wipe out your tax | No such ceiling — a senior citizen can file it even if interest exceeds the exemption limit, provided the computed tax is nil |
| Validity | One financial year; file again each year | One financial year; file again each year |
| Where it is filed | With each payer — every bank, branch set, co-operative bank and post office separately | Same |
The difference in the third and fourth rows is the whole point of having had two forms. A senior citizen is allowed the looser test. Anyone below 60 has to clear both tests, and the second one — the ceiling on the TDS-bearing income itself — is the one that trips people up.
The condition that makes a declaration false
A declaration is a statement under the Income-tax Act that your tax for the year will be nil. It is not a request, not a preference and not a way to delay tax. If you file it while knowing you have taxable income, you have made a false declaration in a statutory form, and the Act treats that seriously.
Do the arithmetic before you sign: add salary, pension, rent, interest from every bank, interest from post office schemes, dividends and capital gains for the whole year. If the tax on that total is not nil, do not file the form. Let the bank deduct and claim the credit when you file your return. That route costs you nothing except time.
We are deliberately not reproducing the basic exemption limit, the rebate amount or the slab rates in this article. Those change with each Finance Act, and the right place to check them is the current year's rates page on the Income Tax Department's site or the Finance Act itself. Getting the declaration wrong because of a stale slab table is exactly the mistake worth avoiding.
5. What changed under the Income-tax Act, 2025
The Income-tax Act, 2025 received the President's assent in August 2025 and came into effect from 1 April 2026, replacing the Income-tax Act, 1961. The substance of the FD TDS rules did not change, but three things did:
- The section number. Tax deduction at source now sits in section 393. Interest paid by a banking company, a co-operative society carrying on banking business, or a post office on a deposit under a Central Government notified scheme is covered in the section 393 table.
- The declaration provision. The no-deduction declaration — the old section 197A route — is now section 393(6). The official description is that a written declaration is filed by the assessee for no deduction of tax at source with the person responsible for paying the income.
- The forms. CBDT published a redesigned set of rules and forms for the new Act, put the drafts out for public comment in February 2026, and the official position stated at the Budget was that "the forms have been redesigned for simpler understanding and compliance for ordinary citizens". In that redesigned set, the two declarations are merged into a single form rather than kept as separate 15G and 15H.
What this means for you in practice is mundane. The declaration still exists, the age-based relaxation for senior citizens still exists, and the nil-tax condition still exists. Only the paperwork label is moving. Many banks and post offices still print and accept forms captioned "15G" and "15H", and some net-banking menus still use those names. If your bank's form says 15G or 15H, it is the same declaration under section 393(6).
One forward-looking change is worth knowing if you hold listed securities or mutual fund units in a demat account: the Budget 2026-27 proposals allow the declaration to be filed with the depository, which then passes it to each payer, so you do not have to chase every issuer separately. That amendment is stated to take effect from 1 April 2027, and the time limit for payers to forward declarations received is moving from monthly to quarterly.
6. When and how to submit the declaration
The declaration is valid for one financial year only. There is no carry-forward and no auto-renewal.
File at the start of the year, not after the deduction
Submit it in April, or as soon as you open a deposit mid-year. A declaration cannot undo tax already deducted and deposited. If you file it in January, the deductions made in the first three quarters stay made.
File once with every payer
One form per bank, per co-operative bank and per post office where you hold deposits. Most banks accept a single form covering all accounts under your customer ID at that bank, so you do not need one per FD — but you do need one per institution.
Get PAN right on the form
A declaration without a valid PAN is invalid, and the bank must then deduct anyway at the higher non-PAN rate. Check that the PAN on the form matches the PAN in the bank's records exactly.
Keep the acknowledgement
Whether you file over the counter or through net banking, keep the acknowledgement with a unique identification number. If tax is deducted despite a valid declaration, that acknowledgement is what you take back to the branch.
Most large banks now accept the declaration through net banking or the mobile app, which removes the branch visit and gives you a timestamped receipt. For post office deposits, the declaration is given at the post office where the account is held.
7. Checking the credit: Form 26AS and AIS
Whatever the bank deducted is only useful to you if it is visible against your PAN. Two statements on the income tax e-filing portal show you this, and they are not the same thing.
| Statement | What it shows | Use it to |
|---|---|---|
| Form 26AS | Tax credited against your PAN — TDS and TCS reported by deductors, advance tax and self-assessment tax you paid, and refunds issued | Confirm the exact amount of tax you may claim as a credit in your return |
| Annual Information Statement (AIS) | A wider picture of reported financial information, including interest paid to you, dividends, securities transactions and more | Cross-check that you have declared all your interest income, including from accounts you forgot |
Both are on the e-filing portal after you log in with your PAN. The order of work before filing a return is: open AIS to list every source of interest, open Form 26AS to total the tax credit, then reconcile both against your own bank statements and interest certificates.
If a deduction is missing from Form 26AS, the usual cause is the deductor quoting a wrong PAN or not having filed its quarterly statement yet. The fix is with the deductor, not with the department — ask the bank to correct and re-file its TDS statement. AIS also carries a feedback facility where you can mark an entry as incorrect or as relating to someone else.
8. If tax was deducted anyway, how to get it back
There is exactly one route, and it is the return. There is no form that reverses a deduction.
- Report the interest. Declare the gross interest from every deposit as income — the figure before deduction, not what was credited to your account.
- Claim the credit. Enter the TDS as shown in Form 26AS. Your return computes tax on total income, sets the credit off against it, and the balance becomes a refund.
- Pre-validate a bank account. Refunds are paid only to a pre-validated account linked to your PAN, so do this before you file.
- File within time. A refund is claimed through a return, so a return not filed is a refund not claimed. File by the due date for your category.
If you are in the nil-tax bracket and this has happened, treat it as a signal to file the declaration next April. For a sense of how the return itself works end to end, see our walkthrough on filing your first ITR.
9. Co-operative banks and post office deposits
Both are explicitly inside the net, and this is where misinformation is thickest.
Co-operative banks and societies. The threshold table in the Act names "a co-operative society carrying on the business of banking" alongside a banking company. So a deposit with a co-operative bank is treated the same as one with a commercial bank: the same Rs 1,00,000 or Rs 50,000 threshold applies, and the same declaration route is available. The idea that co-operative banks are outside TDS is wrong.
Post office deposits. The same provision names a post office paying interest on a deposit made under a scheme notified by the Central Government. Post office time deposits, the Monthly Income Scheme, the Senior Citizen Savings Scheme and recurring deposits all pay taxable interest and all sit inside the same threshold framework. Our comparison of post office savings schemes sets out which of them pay taxable interest and which are exempt.
Three post office products behave differently, and for a specific reason — their interest is exempt by statute, so the question of deduction does not arise. Those are the Public Provident Fund, the Sukanya Samriddhi Account and, within limits, the post office savings account interest. The Sukanya Samriddhi Account in particular carries an exempt-exempt-exempt treatment, which we cover in detail in the Sukanya Samriddhi rules guide.
Two claims you should not act on
"Form 15H saves senior citizens tax." It does not save a rupee of tax. It only stops the withholding, and only when the computed tax is already nil. A senior citizen with taxable income who files it has not saved tax; they have filed a false declaration.
"Below the threshold means tax free." No. Interest below Rs 50,000 or Rs 1,00,000 is still fully taxable income. The bank simply does not withhold. You still report it and still pay tax on it at your slab rate.
Frequently asked questions
At what interest amount does a bank start deducting TDS on my FD?
Once the interest the bank pays you in the year crosses Rs 1,00,000 if you are a senior citizen, or Rs 50,000 if you are not. Those thresholds apply where the payer is a bank, a co-operative society carrying on banking business or a post office. For interest in other cases the threshold is Rs 10,000.
Is TDS on fixed deposit interest an extra tax?
No. It is your own tax collected early. The bank deposits it against your PAN, it shows in your Form 26AS, and you set it off against your tax liability when you file your return. If it exceeds your liability, the balance is refunded. If your slab rate is higher than the deduction, you pay the difference.
What is the difference between Form 15G and Form 15H?
Age, and one extra condition. Form 15H is for a resident individual aged 60 or more at any time during the year and needs only that the tax on estimated total income be nil. Form 15G is for residents below 60 and certain non-individuals, and needs both that the tax be nil and that the total of the TDS-bearing incomes not exceed the maximum amount not chargeable to tax.
Can I file Form 15G if my interest is above the basic exemption limit?
No. That is the extra condition in Form 15G. If the total of the incomes on which TDS applies exceeds the maximum amount not chargeable to tax, you are not eligible, even if a rebate would have reduced your final tax to nil. A senior citizen using Form 15H does not face this ceiling.
Do Forms 15G and 15H still exist under the Income-tax Act, 2025?
The declaration still exists and now sits in section 393(6) of the Income-tax Act, 2025, which took effect from 1 April 2026. In the redesigned set of rules and forms notified for the new Act, the two declarations are merged into one form instead of separate 15G and 15H. Banks and post offices may still use the old captions. Confirm the current form number on the Income Tax Department site before you file.
How often do I have to submit the declaration?
Every financial year, separately with each bank, co-operative bank and post office where you hold deposits. It does not renew automatically. Submit it in April, or as soon as you open a deposit during the year, because it cannot reverse tax already deducted and deposited.
Will splitting my FDs across branches avoid TDS?
No. The threshold is tested payer-wise, and the payer is the bank, not the branch. All interest the bank pays you across branches is aggregated. Splitting across different banks does lower the withholding at each bank, but it does not reduce your taxable income or your duty to report every rupee of interest in your return.
TDS was deducted even though I had filed the declaration. What now?
Take the acknowledgement of your declaration to the branch and ask why it was not applied; if the deduction has already been deposited, the bank cannot reverse it. Claim it as a credit in your return and take the refund. Check Form 26AS first to confirm the amount actually credited against your PAN, and pre-validate a bank account so the refund can be paid.
Sources: Union Budget 2025-26 speech and annexure on TDS/TCS thresholds, indiabudget.gov.in; Memorandum explaining the provisions of the Finance Bill, 2026 (section 393(6) declarations); PIB, Ministry of Finance — Income-tax Act, 2025 to come into effect from 1 April 2026; PIB, Ministry of Finance — CBDT seeks inputs on the proposed Income-tax Rules and Forms; Income Tax Department — current forms, TDS rate chart and threshold limits; India Post — savings schemes.
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