Good news for Fixed Deposit Investors! TDS Limit on FD Interest Income Revised From 1 April; Know Details

Fixed Deposit investors will benefit from revised tax deduction at source (TDS) rules, set to come into effect from 1 April. The TDS exemption limit on FD interest rates will be higher for investors from next month onward.

Till now, TDS was cut on interest earned from fixed deposit schemes if it was more than Rs 40,000 (Rs 50,000 for senior citizens). But the TDS exemption limit on FD schemes was increased in the Union Budget 2025. The announcement will come into effect from 1 April 2025.

TDS on FD Interest: What will change from 1 April 2025?

The TDS exemption limit on FD schemes has been increased from Rs 40,000 to Rs 50,000 for individuals. The tax deduction limit has been increased from Rs 50,000 to Rs 1,00,000 for senior citizens. There is no TDS deducted from the principal amount of FD, regardless of its amount. However, if a person will earn interest above Rs 50,000 on his or her FD's principal amount, then the interest will be subject to tax deduction.

TDS on FD interest from 1 April: What percentage of tax is deducted on FD interest?

Banks deduct TDS at a flat rate of 10% on FD interest above Rs 50,000 (Rs 1 lakh for senior citizens) if the investor has provided PAN card details. TDS on FD interest income increases to 20% if the individual hasn't provided any PAN card details. TDS is deducted in the name of the primary investor for joint FDs. Tax saving FD investment, which is generally made for 5 5-year tenure, also attracts tax deductions based on the rules.

TDS on fixed deposit interest: Can you claim your tax deduction?

The TDS amount will be added to the total income of the individual, and if it is still below the taxable limit, then the deducted TDS can be claimed and will be reimbursed. Apart from FD schemes, the increased TDS limit is also applicable on earnings from investment in sovereign gold bond schemes (SGB)

Revised TDS rules: How it will benefit individuals?

Revised TDS rules on FD schemes will benefit individuals as it will provide them greater financial freedom and encourage more people to invest in fixed deposit schemes. It will also be a major support for individuals who are mainly dependent on on FD interest as a major source of their passive income. TDS filing is considered a tedious task for many and increase in threshold limit may free many individuals from filing TDS solely for claiming tax deducted on FD interest.

Fixed deposit schemes are majorly run by banks and also by other financial institutions like NBFCs. People are required to invest lumpsum amount in fixed deposits for a specific period, ranging from a week to five or ten years. Fixed deposit, also known as term deposit, is a great investment option for risk-averse investors who are looking to park their money for assured returns. Most of the FD schemes offer nearly 7-8% of interest on investments for an average tenure of two to three years. However, the FD interest percentage may vary based on factors like FD tenure, amount, bank, and age of the investor.