How is TDS on Fixed Deposit Calculated?

Most people want stable returns, so they invest in fixed deposits that offer the same regardless of the market scenario. However, there's one phenomenon - Tax Deducted at Source (TDS) - on the earned interest. It reduces your eventual gains. The fun goes away a little, so you must factor in the tax part while planning your finances. This will ensure the post-tax returns are greater. That being said, the key is to know the TDS calculation on FD interest. Knowing the calculation will help you plan your fixed deposit investments accordingly and prevent taxes on your annual interest income. In this blog, we'll share the TDS calculation process, applicable rates and exemptions. To help you plan better, we will share online calculators.

What is TDS on Fixed Deposit Interest?

TDS on fixed deposit interest implies the tax deducted by the bank once earnings exceed the exemption limits. The exemption limit is INR 40,000 for regular customers and INR 50,000 for senior citizens. However, the government has hiked the exemption limit for senior citizens on deposits to INR 1 lakh for FY 2025-26 in the Union Budget 2025.

Current TDS Rates for Fixed Deposits

As per the Income Tax Act, the TDS for fixed deposits is 10%. If the investor does not provide the Permanent Account Number (PAN), the TDS rate will rise to 20% on fixed deposit interest income.

How to Calculate TDS on FD Interest Manually?

The TDS calculation on FD interest is made based on the interest earned across financial years till the maturity period.

Example - Ravi, Ramesh and Ranu invest INR 10 lakh each in a fixed deposit for three years (quarterly compounding) at an interest rate of 8%, 8.50% and 9% per annum, respectively, across different banks.

TDS Deduction Amount for Ranu

TDS Deduction Amount for Ramesh

TDS Deduction Amount for Ravi

Using TDS Interest Calculators Online

The TDS deduction is based on the interest earned on a fixed deposit. It is thus important to understand the function of FD interest calculator first. The calculator works based on the investment amount, interest rate, tenure, and interest compounding frequency.

While planning finances, one should use the calculator and benefit. The best part about the online TDS interest calculator is the ease it offers to investors. By simply entering the variables mentioned above, one can calculate the fixed deposit interest and the TDS on FD. What's more, the calculator is error-free, so you can rely on the results provided by it. You can experiment with different values to determine the investments you need to make to maximise interest earnings and pay income tax that is lower. What's more, the calculator is available online. To your comfort, you can visit the official website or app of BharatFD, a marketplace replete with attractive fixed deposits from trusted banks in India.

Knowing the interest income earned on a fixed deposit and taxable income is critical. The TDS interest calculator is a perfect way to ensure both.

Exemptions and Avoiding TDS on FD Interest

We have already made it clear that there is no TDS if the interest income is up to INR 40,000 (regular customers) and INR 1,00,000 (senior citizens). The limit for senior citizens was raised from INR 50,000 in Budget 2025). As interest earnings exceed the ceilings as stated above, banks will deduct 10% and 20% TDS in case of no PAN submission. You can gain TDS exemptions on fixed deposit interest income provided the total income is lower than the taxable income limit. There will be no income tax deductions if your total income is less than INR 2.5 lakh (old tax regime) and INR 4 lakh (new tax regime, raised from INR 3.5 lakh in Budget 2025). While 15G applies to regular citizens, 15H is for senior citizens.

How to Claim a Refund for Excess TDS?

You can avoid the tax deducted at source by submitting the 15G/H form to the bank. However, due to some reasons, you may miss doing so. In that case, you can't get the refund for excess TDS from the bank as it would have submitted the same to the government. As per the income tax rules, individuals can claim excess TDS deduction by filing the Income Tax Return (ITR). The Income Tax Department scrutinises the ITR before approving a TDS refund claim.

Common Mistakes to Avoid in TDS Calculations

Here are some common mistakes people generally commit while calculating the TDS on FDs.

Misunderstanding the TDS Threshold Limits

The TDS threshold for deposit interest is INR 40,000 (General Citizens) and INR 1,00,000 (Senior Citizens). If the annual interest income surpasses these levels, there will be a tax liability for investors. But how much will the tax liability be and what's the calculation methodology? That's where many falter.

For example, you are 40 years old and earn fixed deposit interest worth INR 80,000 in a financial year. So, don't think that the 10% TDS will apply to the balance amount after the threshold i.e. 40,000. The TDS will apply to INR 80,000. The TDS amount would thus be INR 8,000.

Failing to Provide PAN Details

You might calculate the TDS on FD at 10% and find a deduction of 20% and wonder what went wrong. The real culprit - your failure to provide PAN details while opening a fixed deposit account/s.

TDS on Fixed Deposit

Frequently Asked Questions (FAQs)

1. How is TDS on fixed deposit interest calculated?

TDS is calculated at 10% and 20% in case of no PAN submission, provided the fixed deposit interest income surpasses the threshold - INR 40,000 (General Citizens) and INR 1,00,000 (Senior Citizens) - in a financial year.

2. Can I avoid TDS on my FD interest?

You can avoid the TDS on FD interest by submitting Form 15G (General Citizens) and Form 15H (Senior Citizens) provided your total income is below the taxable limit.

3. What happens if TDS is deducted but my income is below the taxable limit?

You can file the Income Tax Return to claim a refund for the excess TDS deduction.