TDS on Fixed Deposit Interest in India: FY 2026-27 Guide

TDS is not the final tax on your FD

Tax Deducted at Source is an advance collection made by the bank or other payer. The deducted amount should appear as tax credit in Form 26AS, AIS or the corresponding statement under the new Act. Your final liability is calculated only after adding the full taxable interest to all other income and applying the relevant tax rules.

A person in a low tax slab may receive a refund of excess TDS after filing the return. A person in a higher slab may owe additional tax even after the bank has deducted 10%. No TDS does not mean no tax; it can simply mean the interest stayed below the deduction threshold.

Interest from cumulative FDs can be credited for tax and TDS purposes during the tenure even though cash is received only at maturity. Review the annual interest certificate instead of waiting for the deposit to close.

Current FD and RD interest thresholds

For interest paid by a banking company, co-operative bank or specified public company on time deposits, the current no-TDS threshold is generally Rs 50,000 in a year. For a resident senior citizen, it is Rs 1,00,000.

Time deposits include recurring deposits. The threshold is generally computed with reference to the bank under core banking, not separately for every branch. Splitting deposits across two branches of the same bank may therefore not create two thresholds.

Different payer categories can have different limits. This article focuses on ordinary bank, post-office and co-operative-bank deposit interest; corporate deposits, bonds and other interest should be checked separately.

How much TDS can the bank deduct?

The ordinary TDS rate on resident deposit interest is generally 10% when valid PAN details are available and no lower or nil-deduction relief applies. A higher rate can apply when PAN or compliance requirements are not satisfied.

Once estimated annual interest is expected to cross the threshold, banks commonly deduct on the amount credited or paid in accordance with the law; the threshold is not a tax-free slice like the equity LTCG exemption.

TDS may be deducted quarter by quarter. Compare the bank interest certificate, deposit ledger and tax statement so duplicate or missing credits are identified before filing.

Form 15G and Form 15H: who can use them?

Under the familiar framework, Form 15G is for eligible resident persons below 60 years, excluding companies and firms, and Form 15H is for eligible resident individuals aged 60 years or more. The declaration tells the payer that estimated tax on total income is nil.

The declaration is not available merely because interest is below the TDS threshold. For Form 15G, additional income limits apply. For Form 15H, the central test is generally whether estimated tax on total income is nil. Incorrect declarations can create tax and penalty consequences.

Give the declaration before the bank credits or pays interest, preferably near the start of the year. A declaration submitted after TDS has already been deposited normally does not reverse the transaction immediately; the taxpayer may need to claim credit and refund in the return.

What changes in Tax Year 2026-27?

From 1 April 2026, TDS on payments whose credit or payment trigger occurs under the new period is governed by the Income Tax Act, 2025. The department states that TDS rates and monetary thresholds were retained, although section numbering and reporting changed.

The declarations traditionally called Form 15G and Form 15H are furnished through Form No. 121 under the Income Tax Rules, 2026. The official manual describes Form 121 as a nil-tax declaration and recommends giving it to the deductor before income is credited or paid.

Banks and taxpayers should use the new tax-year and form references for 2026-27 instead of selecting the old Act by habit. Existing public language may continue saying 15G/15H during the transition.

How to claim back excess TDS

Collect the annual interest certificate from every bank and download the tax-credit statement. Match PAN, gross interest and TDS amounts.

Report the full taxable interest under the appropriate income head. Do not report only the net amount received after TDS.

Claim the TDS credit shown against your PAN. If final tax is lower than total credits, the return can show a refund.

Resolve mismatches with the bank where credit is missing, duplicated or reported under the wrong PAN. Filing with an unsupported credit can delay processing.

Practical FD tax checklist

Estimate interest across all FDs and RDs before the year begins.

Check whether the Rs 50,000 or Rs 1 lakh bank threshold applies to you.

Submit the correct nil-tax declaration only when genuinely eligible.

Keep PAN and residential-status records updated with the bank.

Compare FD maturity using the RupeeKit FD Calculator, but calculate tax separately because advertised maturity values are normally pre-tax.

File a return where required or where a refund needs to be claimed.