How Much Tax Is Deducted on Fixed Deposit

Know the applicable tax implications on income from fixed deposit.
Fixed Deposit
3 mins
01 April 2024

Fixed deposits are popular investment options that offer security and stable returns. However, it is essential to be aware of the tax implications associated with these investments.

How are tax deductions calculated?

Interest income from fixed deposits is a taxable form of income in India. The tax liability depends on the age of the taxpayer and the amount of interest earned.

For customers below 60 years of age:

The interest income from fixed deposits is added to the individual's total taxable income and taxed as per the income tax slab. The tax rates increase progressively with higher income slabs.

For senior citizens:

Senior citizens enjoy certain tax benefits and higher exemption limits on interest income from fixed deposits. Post the exemption limit the income from fixed deposit is added to the individual’s total income and taxed as per the tax slab rates.

The following table summarises the tax implications for all customers:

Tax Deduction Criteria Below 60 Years of Age Senior Citizens (60 Years and above)
Interest Income Taxable Taxable
Tax on Interest Income Taxed at the applicable slab rate Taxed at the applicable slab rate
Exemption If the interest earned is less than Rs. 40,000.
If the interest earned is less than Rs. 50,000.
TDS (Tax Deducted at Source) 10% If PAN is submitted
20% if PAN is not submitted
10% If PAN is submitted
20% if PAN is not submitted
Avoid deduction of TDS Form 15G Form 15H

Note: The exemption limit is applicable for interest income across all banks and financial institutions.

The above table showcases that senior citizens can avail of a higher exemption limit on interest income from fixed deposits, enabling them to reduce their tax liability.

How to avoid TDS on interest income?

Form 15G and Form 15H are self-declaration forms that can be submitted to banks and other financial institutions to avoid deduction of tax at source (TDS) on interest income. Form 15G is for individuals who do not have any other sources of income chargeable to tax, while Form 15H is for senior citizens.

Understanding the tax implications of fixed deposits is crucial for effective financial planning. It involves being aware of the tax rates, TDS on interest income and the benefits of tax-saving fixed deposits.

Also read: Rebate under Section 87a


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