Section 194A of the Income Tax Act: TDS on Interest Income

In summary

Last Updated: September 2026

Section 194A doesn't apply to every rupee of interest you earn — it applies only once your interest from a specific payer crosses the threshold for the year, and the threshold itself differs by your age and the type of payer.

• Standard TDS rate: 10%, on interest exceeding the annual threshold
• Threshold: Rs. 40,000/year for individuals under 60, Rs. 50,000/year for senior citizens
• Without PAN on record: TDS rises to 20%
• Applies to: bank and post office deposits, recurring deposits, and certain loan interest — not interest on listed securities

• Form 15G/15H can help avoid TDS deduction entirely for those with no taxable income

  
  
  

TDS deducted under Section 194A is credited against your final tax liability when you file your ITR, whether or not you owe tax on that specific interest.

No, and this is the real confusion behind most Section 194A questions. TDS is a collection mechanism, not a final tax determination — your actual tax liability on interest income depends on your total income and applicable slab, which the bank deducting TDS doesn't know or calculate.

The realistic situations a taxpayer finds themselves in are:

• Your total income is genuinely taxable, and the TDS deducted is correctly credited against your final liability
• Your total income falls below the taxable threshold, and you're entitled to a full refund of TDS deducted, claimed when you file your ITR

• Your total income is taxable but at a lower effective rate than 10%, meaning you're due a partial refund

  
  

Filing your ITR is what reconciles TDS deducted against your actual liability — TDS deduction alone never settles your final tax position. Treating a TDS deduction as proof you owe tax on that income is a common misunderstanding worth correcting, since the two are related but genuinely separate steps in the process.

The threshold applies per payer, not across all your interest income combined — interest from three different banks, each below the threshold individually, may not trigger TDS at any of them even if the combined total exceeds the threshold. This is a genuine gap in the TDS mechanism itself, not a loophole — the interest remains fully taxable on your actual return regardless of whether any individual bank deducted TDS on it.

1. Confirm your total estimated income for the year falls below the basic exemption limit, making you genuinely not liable for tax.
2. Obtain Form 15G (for individuals below 60) or Form 15H (for senior citizens) from your bank or online.
3. Submit the completed form to each bank or institution paying you interest, at the start of the financial year.
4. Resubmit the form each financial year, since it doesn't carry forward automatically.

5. If TDS was already deducted before you submitted the form, claim it as a refund when filing your ITR.

   
   

Submitting Form 15G/15H incorrectly — when your actual income is taxable — carries its own compliance risk, so confirm your genuine eligibility before submitting rather than using it as a default.

Consider Meena, a 58-year-old retired teacher with fixed deposits across two banks, earning Rs. 45,000 interest from Bank A and Rs. 38,000 from Bank B in the same financial year, with a CIBIL Score of 761.

Because Meena is not yet 60, her threshold is Rs. 40,000 per payer, not the higher senior citizen threshold — Bank A deducts TDS on her interest, while Bank B doesn't, since each payer's threshold is assessed independently.

Interest income and its TDS record on Form 26AS can factor into your overall income documentation during a home loan application, particularly for applicants with significant deposit-based income. Check your home loan eligibility with your complete income picture, including interest income, documented.