You open an FD, the interest keeps building up, and everything feels pleasantly simple. Then tax season arrives, and the questions start. Is this interest taxable? Why was TDS cut? Do I need to fill in some form? Let's go through it step by step.
Is FD Interest Taxable
Yes. Let's look at how it works.
FD Interest as Income from Other Sources
The interest you earn on a fixed deposit doesn't get its own special tax treatment. It is added to your total income and taxed as per the income tax slab that applies to you. So if you fall in a higher slab, a bigger share of your FD interest goes to tax.
Tax on FD Interest Even Without TDS
Here's a common mix-up. People assume that if no TDS was deducted, there's nothing to pay. That isn't the case. FD interest stays taxable whether or not TDS is cut, and you should report it when you file your income tax return.
What Is TDS on FD Interest
TDS means tax deducted at source. Once the interest on your deposit crosses the prescribed threshold, the institution deducts tax before the interest reaches you and deposits it with the government on your behalf.
SIDBI states a TDS exemption for interest income up to ₹10,000.
TDS Rate on FD Interest
Two things decide the rate:
- PAN provided: TDS is generally deducted at 10%.
- PAN not available: TDS is deducted at a higher rate.
For the exact rate applied to SIDBI deposits, confirm with SIDBI.
Form 121 to Avoid TDS on FD Interest
What Is Form 121
Form 121 is a self-declaration you submit to request that TDS not be deducted on your interest. From 1 April 2026, it replaces the older Forms 15G and 15H. So if you've been hearing about those forms from friends or family, this is the new version.
Who Can Submit Form 121
Resident individuals whose estimated tax for the year is nil can submit it. One thing to keep in mind: eligibility depends on your total income, not just the interest from the FD. A small FD doesn't automatically qualify you if your overall income puts you in the tax net.
When to Submit Form 121
You generally need a fresh declaration every financial year, so don't treat it as a one-time task. Submit it early, ideally at the start of the year, so TDS isn't deducted in the first place. The form and submission process for FD depositors should be confirmed with SIDBI.
How to Check TDS on Your FD
Once the year ends, it's smart to verify what was actually deducted. Here are the two places to look:
TDS Certificate and Form 168
Check the TDS certificate issued by the deductor. Then match it against Form 168 (earlier known as Form 26AS) to confirm the tax deducted has really been credited against your PAN.
Annual Information Statement (AIS)
AIS goes one step further. It also shows the interest reported against your PAN, which helps you catch any mismatch before you file.
Claiming Credit or Refund of TDS on FD Interest
Reporting FD Interest in Your ITR
Report the full FD interest in your income tax return, and claim credit for the TDS that has already been deducted. That way, you don't pay the same tax twice.
Refund if Your Tax Liability Is Lower
Sometimes more TDS is cut than you actually owe. If TDS exceeds your tax liability, you can claim the excess as a refund while filing your return.
Tax Planning Tips for FD Investors
A little planning goes a long way. Try these:
- Estimate your total interest before investing. Add up the interest expected from all your deposits to see whether TDS or tax will apply.
- Submit Form 121 early if you're eligible. Doing it at the start of the financial year avoids TDS being deducted at all.
- Keep your PAN updated. A valid PAN keeps you out of the higher deduction rate.
FD Taxation for Senior Citizens
TDS Threshold for Senior Citizens
Banks apply a higher TDS threshold for senior citizens, which means more interest can be earned before TDS kicks in. For the threshold applicable to SIDBI fixed deposit, please confirm with SIDBI.
Form 121 for Senior Citizens
Nothing new to learn here. Senior citizens use the same Form 121, which replaces the earlier Form 15H.
Conclusion
FD interest is taxable whether or not TDS is deducted. Know your TDS threshold, submit Form 121 early if you're eligible, and report your interest in your return. A few minutes of attention each year keeps surprises away.
Frequently Asked Questions
1. Is FD interest taxable in India?
Yes. FD interest is taxable as per your income tax slab, even if no TDS is deducted.
2. What is the TDS limit on SIDBI FD interest?
SIDBI states a TDS exemption for interest income up to ₹10,000.
3. What is the TDS rate on FD interest?
It is generally 10% with PAN, and higher without PAN.
4. What replaced Form 15G and Form 15H?
Form 121 replaces both from 1 April 2026.
5. Can I get a refund of TDS deducted on FD interest?
Yes. If TDS exceeds your tax liability, you can claim the excess as a refund while filing your return.
