Fixed deposit interest is taxable as income from other sources. Banks deduct TDS (Tax Deducted at Source) to collect tax in advance — but with smart planning, many senior investors can avoid or reduce this deduction legally.
📌 1. Know the Current TDS Threshold (FY 2025‑26)
For senior citizens (age 60+):
- 🟢 No TDS is deducted if interest from FDs with a particular bank is up to ₹1,00,000 in a financial year.
This revised threshold is effective from 1 april 2025. - 🟠 If interest from a single bank exceeds ₹1,00,000, banks will start deducting TDS at 10% (with PAN).
💡 Note: This is just a threshold for TDS deduction — the interest is still taxable if your total income exceeds the basic exemption.
📍 2. Submit Form 15H (Self‑Declaration)
✔ What is Form 15H?
Form 15H is a declaration senior citizens (60+) can file with banks stating that their total tax liability for the year will be zero because their income (including FD interest) will be below the basic exemption limit.
✔ How It Helps
- When correctly submitted before the deduction, banks will not deduct TDS on your FD interest.
- You do not have to wait to claim a refund later.
✔ Who Can File Form 15H?
You can file it if:
- You are 60 years or older
- Your total income (after deductions) will be below the basic exemption limit
- Under the new tax regime, this limit is ₹12 lakh for no tax after rebate under Section 87A.
- Under the old regime, it’s ₹5 lakh (or ₹3 lakh in some older rules but often not relevant with 87A under new regime).
⚠️ Note: Banks still deduct TDS automatically based on interest income — Form 15H tells the bank not to deduct because you won’t owe tax at year‑end.
📌 3. Investment Planning to Stay Under Threshold
Even without Form 15H, you can avoid TDS through smart FD structuring:
🧠 Split FDs Across Banks
If the interest from each bank is less than ₹1 lakh, no TDS will be deducted at each bank level — even if total interest is more than ₹1 lakh.
Example:
- Bank A FD interest: ₹90,000
- Bank B FD interest: ₹85,000
🔸 No TDS anywhere because no single bank paid over ₹1,00,000.
🗓 Choose Quarterly/Monthly Interest Payout
- With non‑cumulative FDs, interest is paid periodically.
- This may help manage how much interest is credited in a year, keeping each bank’s interest below the ₹1 lakh mark.
⚠️ With cumulative FDs, interest gets reinvested and credited at maturity — which could show a large amount in one year and trigger TDS.
💡 4. Ensure PAN Is Updated with the Bank
- If your PAN is linked, TDS is deducted at 10% on interest above the threshold.
- Without PAN, banks may deduct TDS at 20% — which hurts your returns.
📍 5. If TDS Is Deducted — Claim Refund via ITR
Even if TDS was deducted:
- You can file your Income Tax Return (ITR)
- Report your interest income and tax liability
- Claim refund of excess TDS deducted
This is especially useful if your total tax liability is zero due to deductions and rebates.
📌 Quick Checklist Before 15H Filing
✔ Submit Form 15H before the financial year starts or early in the year
✔ Ensure income slips, pension, other interest added in estimate
✔ Provide PAN to bank
✔ Submit separate Form 15H at each bank where FDs exist
⚠️ Important Notes
- The ₹1 lakh TDS threshold applies per bank, not aggregated across all banks.
- Interest income is still taxable if your total income exceeds the basic exemption — TDS is just an advance collection.
- Filing the correct tax return is essential — claiming inaccurate thresholds without declaring income may invite scrutiny.
🧠 Summary — How to Avoid TDS on FD Interest (Senior Citizens)
Strategy
When It Works
₹1 lakh interest rule
If interest from one bank ≤ ₹1 lakh (no TDS)
Form 15H
Total taxable income ≤ basic exemption limit
Split FDs across banks
Limits interest per bank below threshold
Quarterly/Monthly interest payout
Prevents large lumps triggering TDS
File ITR & claim refund
If TDS was deducted but tax liability is zero
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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