Tax Deduction on Fixed Deposit Interest: TDS Rules, Rates and Form 121

For interest payments to resident depositors, the standard TDS rate is generally 10% where a valid PAN is furnished, subject to the applicable law and any relevant exemption or declaration.

If PAN is not furnished or does not meet the applicable requirements, tax may be deducted at a higher rate. The exact treatment depends on the law applicable to the payment and the depositor’s circumstances.

For example, if Rs. 20,000 of interest is subject to TDS at 10%, the deduction would be Rs. 2,000 and the interest paid after that deduction would be Rs. 18,000. This is an illustration of the deduction only; it does not determine the depositor’s final income tax liability.

The TDS rate should not be confused with the income tax slab rate. A depositor’s final tax may be higher or lower than the TDS amount, depending on the applicable rules and total taxable income.

Yes, FD interest is generally taxable under the applicable income tax rules. It is usually included in the depositor’s taxable income and taxed according to the rules that apply to that person.

The absence of TDS does not automatically make the interest tax-free. For example, an FD may earn interest below the provider’s TDS threshold, meaning the provider does not deduct tax at source. The depositor may still need to report the interest and pay tax if required under the applicable tax rules.

Similarly, if TDS is deducted, that does not necessarily settle the depositor’s full tax liability. The deduction is taken into account when calculating the final tax payable.

How does TDS differ from income tax?

Form 121 is the consolidated declaration introduced under the Income-tax Act, 2025 to replace the earlier Forms 15G and 15H from 1 April 2026. It allows eligible taxpayers to declare that tax should not be deducted at source on specified income, subject to the prescribed conditions.

Submitting Form 121 does not automatically make every depositor exempt from TDS. The depositor must meet the applicable eligibility requirements, and the declaration must be complete, accurate and submitted in accordance with the relevant rules.

How do you submit Form 121 for a Bajaj Finance FD?

Bajaj Finance provides an online facility to submit Form 121 through its service portal. The published process is:

1. Visit the official Bajaj Finance Form 121 service guide.
2. Sign in using your registered mobile number and complete OTP verification.
3. Verify your details as prompted.
4. Open the Service section and select Relations.
5. Select the relevant fixed deposit.
6. Choose the option to submit Form 121.
7. Review the declaration, provide any additional information requested and complete the verification process.
8. Submit the form and retain any confirmation provided.

The declaration must be submitted for the relevant tax year. Bajaj Finance’s published terms state that a fresh Form 121 is required for each financial year. Check the current service guide and applicable terms before submitting it.

When may Form 121 not be valid?

Form 121 is subject to the eligibility conditions prescribed under the applicable tax rules. Bajaj Finance’s published terms also specify interest-related limits above which the form will not be valid for its FD TDS process: aggregate interest exceeding Rs. 4 lakh for non-senior citizens and Rs. 12 lakh for senior citizens aged 60 years or above.

These are provider-published conditions and should not be treated as universal income tax exemption limits. Eligibility depends on the applicable law and the depositor’s circumstances. If the declaration is not valid, incomplete or submitted too late, TDS may still be deducted.

When TDS is deducted, the amount should be reported to the government against the relevant taxpayer details. The depositor can then check whether the deduction appears correctly in their tax records.

The process generally involves:

• Reviewing the interest and TDS details provided by the deposit provider.
• Checking the relevant tax records, such as Form 26AS and the Annual Information Statement (AIS), where applicable.
• Confirming that the PAN and other details used for reporting are correct.
• Including the FD interest in the income tax return as required.
• Claiming the eligible TDS credit when calculating the final tax liability.

If the TDS amount is greater than the final tax payable, a refund may be available under the applicable process. If the final tax liability is higher than the TDS already deducted, additional tax may be payable.

You can estimate the immediate effect of TDS by multiplying the interest amount subject to deduction by the applicable TDS rate.

For example, suppose a depositor earns Rs. 30,000 in FD interest during the relevant period, and the full amount is subject to TDS at 10%.

This example assumes the entire interest amount is subject to deduction at the stated rate. It does not establish whether TDS is legally required in a particular case, nor does it calculate the depositor’s final tax liability.

Planning an FD investment? The Bajaj Finance FD calculator can help estimate interest or maturity proceeds based on the amount, tenure and applicable rate. Compare the estimated interest with the relevant TDS rules and remember that the final tax treatment depends on your circumstances.

Before opening or renewing an FD, consider the following:

• Interest rate and tenure: Check the applicable rate for the selected deposit period and payout option.
• TDS threshold: Confirm the threshold applicable to the deposit provider and how interest from multiple deposits is aggregated.
• Tax treatment: Understand that interest may be taxable even when no TDS is deducted.
• Form 121 eligibility: If you expect to submit a declaration, verify that you meet the current eligibility conditions and can submit the form on time.
• PAN details: Ensure the provider has accurate PAN information to avoid incorrect reporting or a potentially higher deduction.
• Payout option: Interest may be paid periodically or accumulated until maturity, depending on the deposit terms. TDS treatment can affect the amount credited or reinvested.
• Record keeping: Retain deposit statements, TDS details and any declaration acknowledgement for tax reporting.

Review the current terms and the applicable tax rules before making a decision.

TDS on FD interest depends on the deposit provider, the aggregate interest payable during the financial year and the applicable tax rules. For Bajaj Finance FDs, the published terms generally specify a Rs. 10,000 annual interest threshold for TDS. From 1 April 2026, eligible depositors can use Form 121 in place of Forms 15G and 15H to declare eligibility for non-deduction of TDS. However, the declaration is subject to eligibility conditions, and FD interest may remain taxable even if no TDS is deducted. Reviewing the current terms, keeping accurate tax records and checking TDS credits can help depositors report interest correctly and assess their final tax liability.