TDS on Interest Income Under Section 194A: FD, RD, and Beyond

Every fixed deposit that credits interest above a certain amount gets a slice of it deducted before it reaches you, and the exact threshold where that starts has changed more recently than a lot of people realise. Section 194A covers TDS on interest other than interest on securities, which in practice mostly means bank and post office fixed and recurring deposits, and getting the current threshold right matters, since the older, frequently repeated figures are no longer accurate.

The Current Thresholds, Raised in 2025

TDS under Section 194A applies once interest paid by a bank, co-operative bank, or post office to an individual crosses ₹50,000 in a financial year, or ₹1,00,000 specifically for senior citizens, thresholds the Finance Act 2025 raised from the previous ₹40,000 and ₹50,000 figures respectively. For interest paid by other payers, companies paying debenture interest, for instance, rather than banks, the threshold is a flat ₹10,000, also raised from the earlier ₹5,000. A lot of calculators, articles, and even some payroll or accounting software built before this change still reference the older, lower figures, so it's worth confirming your own tools reflect the current thresholds rather than assuming.

The Rate, With and Without PAN

The TDS rate is 10% with a valid PAN on record. Without one, the rate jumps considerably higher, to the maximum marginal rate, which is why banks routinely ask depositors to complete PAN-related formalities before opening a fixed deposit of any real size, not just as a formality but because the gap in outcome is substantial.

What Counts as "Interest" Under This Section

Section 194A covers interest other than interest on securities, which has its own separate provision. In practice, this means fixed deposit interest, recurring deposit interest, and interest on loans and advances between parties, among others, but specifically excludes savings account interest, which isn't subject to TDS under this section at all regardless of amount, and interest from specified small savings schemes, which typically fall outside this provision's scope entirely.

Avoiding TDS: Form 15G and 15H

If your total income for the year is genuinely below the basic taxable threshold, you can submit Form 15G (or Form 15H if you're a senior citizen, which carries its own, generally more generous, self-declaration conditions) to the bank to stop TDS from being deducted at source in the first place, rather than claiming a refund after filing. This only works honestly: submitting a declaration when your actual total income, including the interest itself, exceeds the basic exemption limit doesn't legitimately avoid tax, it just shifts the mismatch to surface later instead.

TDS Isn't the Final Word on Interest Income

Whether or not TDS was deducted, the full interest earned is taxable income, added to your total income and taxed at your applicable slab rate; TDS is simply a credit against whatever you actually owe, not a substitute for reporting the income. This trips up people whose interest income falls below the TDS threshold with any single bank but adds up to a meaningfully taxable amount once combined across several fixed deposits at different banks, since each bank applies the threshold independently to what it pays, not to your total interest income across all of them.

Under the Income Tax Act, 2025

Section 194A has moved into the new Act's consolidated Section 393, structured as payment-category tables rather than a standalone section, consistent with how the rest of the TDS provisions have been renumbered. The rate and current thresholds carry over unchanged into the new numbering.

The most common mistake here isn't a rate error, it's assuming last year's threshold, or a threshold remembered from a couple of years back, still applies. Confirm the current ₹50,000/₹1,00,000 bank threshold before assuming a fixed deposit's interest is below the line, and reconcile everything against your Form 26AS and AIS before filing, since interest income is exactly the kind of thing that shows up there even when you didn't think to track it yourself.