For Non-Senior Citizens (below 60 years of age):
- TDS will be deducted if your FD interest income from a single bank/branch exceeds ₹50,000 in a financial year.
- If your interest income is below ₹50,000, no TDS will be deducted by the bank.
For Senior Citizens (60 years and above):
- TDS will be deducted if your FD interest income from a single bank/branch exceeds ₹1,00,000 in a financial year.
- If your interest income is below ₹1,00,000, no TDS will be deducted by the bank.
Important points to note:
- TDS Rate: If TDS is applicable, it is generally deducted at 10% if you have provided your PAN card. If you haven’t provided your PAN, the TDS rate will be 20%.
- Form 15G/15H: Even if your interest income exceeds the TDS threshold, but your total income for the financial year is below the basic exemption limit (i.e., you have no tax liability), you can submit Form 15G (for non-senior citizens) or Form 15H (for senior citizens) to your bank. This declares that your income is below the taxable limit, and the bank will not deduct TDS. You need to submit these forms at the beginning of each financial year.
- Taxability: Remember that even if no TDS is deducted, the interest income from your FD is fully taxable as “Income from Other Sources” and will be added to your total income. You will need to declare this income when filing your Income Tax Return and pay tax according to your applicable income tax slab. TDS is just an advance payment of tax; it’s not the final tax liability.
- Multiple FDs: The TDS threshold applies to the interest income from FDs held with a single bank/branch. If you have FDs in multiple banks/branches, the interest from each will be considered separately for TDS purposes by that specific bank/branch. However, for your overall income tax calculation, all your FD interest income from all sources must be aggregated.
To answer your specific question:
If you are getting a 7.2% return and want to avoid paying TDS, and assuming you are a non-senior citizen (as you asked if interest income is ₹40,000 more – the threshold for non-senior citizens was ₹40,000 in previous FYs, but is now ₹50,000 for FY 2025-26), you need to calculate the deposit amount that yields an annual interest of ₹50,000 or less.
Let ‘P’ be the principal amount you can deposit. Interest (I) = P * R * T Where:
- I = Interest income
- P = Principal amount
- R = Rate of return (as a decimal)
- T = Tenure (in years)
If you want your interest income to be ₹50,000 (the maximum for non-senior citizens to avoid TDS from a single bank/branch for FY 2025-26):
50,000=P×0.072×1 (assuming a 1-year FD or annual interest calculation) P=50,000/0.072 P≈₹6,94,444
So, if you deposit up to approximately ₹6,94,444 in one FD at 7.2% interest, your annual interest income will be ₹50,000 or less, and the bank will not deduct TDS (assuming you provide your PAN).
If you are a senior citizen, you could deposit even more, as the TDS threshold for senior citizens is ₹1,00,000 for FY 2025-26.
1,00,000=P×0.072×1 P=1,00,000/0.072 P≈₹13,88,888
Regarding your statement “if interest income is ₹40,000 more do i have to pay tds”:
As of FY 2025-26, the threshold for non-senior citizens is ₹50,000. So if your interest income exceeds ₹50,000 (even by ₹1), TDS will be deducted by the bank at 10% (if PAN is provided).
In summary:
- For FY 2025-26, the TDS exemption limit for FD interest from a banking company is ₹50,000 for non-senior citizens and ₹1,00,000 for senior citizens.
- If your interest income is below these respective limits, no TDS will be deducted.
- If your total income is below the taxable limit, you can submit Form 15G/15H to avoid TDS, even if your interest crosses the threshold.
- All FD interest is taxable as per your income tax slab, regardless of TDS deduction.
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