Tax on FD, RD and Savings Account Interest: TDS Thresholds, Form 15G/15H, and the 80TTA / 80TTB Deductions

Interest is the income most people under-report by accident. It arrives in a dozen small credits across savings accounts, fixed deposits and recurring deposits, the bank deducts some TDS on the larger ones, and it is tempting to assume the matter is settled. It is not: interest is taxed at your full slab rate, the bank's 10% is only a partial payment, and since the AIS now lists every rupee of interest paid by every bank against your PAN, the mismatch notice is automatic. This guide covers how each kind of interest is taxed, the TDS thresholds (raised in 2025), how to stop TDS legitimately with Form 15G/15H, the two old-regime deductions, and what a ₹12 lakh earner needs to know about the rebate.

How interest is taxed: slab rate, every year

Interest from bank deposits, post office schemes, bonds, company deposits and loans you have given is "income from other sources", added to your total income and taxed at whatever slab it lands in - up to 30% plus cess. There is no special rate and no indexation.

It is taxed on an accrual basis for most people: the interest a cumulative FD earns in FY 2026-27 is taxable in FY 2026-27 even if the deposit matures in 2029 and you receive nothing until then. Banks report accrued interest to the department each year, and Form 26AS / AIS will show it. Declaring the whole amount on maturity instead is the single most common cause of an interest-income notice.

TDS under Section 194A: the thresholds from 1 April 2025

Banks, post offices and co-operative banks deduct 10% TDS when the interest they pay you in a year crosses a threshold. Budget 2025 raised those thresholds with effect from FY 2025-26, and they carry into FY 2026-27:

• The threshold is per bank, not per account or branch - interest across all FDs and RDs with one bank is aggregated.
• Once crossed, TDS applies to the whole interest, not just the excess.
• No PAN on record: 20%. Make sure every bank has your PAN.
• TDS is a credit, not a settlement. At the 30% band, a ₹1 lakh FD interest carries ₹31,200 of tax; the bank withholds ₹10,000; the remaining ₹21,200 is yours to pay, via advance tax or with the return.

Splitting deposits across banks to stay under each threshold avoids TDS, not tax. The interest is still fully taxable and still reported in your AIS.

Form 15G / 15H: stopping TDS when you owe no tax

If your total income for the year will be below the taxable limit, you can ask the bank not to deduct TDS by filing a self-declaration at the start of the financial year (and again for every new deposit):

• Form 15G - for individuals under 60 and HUFs. Two conditions: the tax on your estimated total income is nil, and your total interest income for the year is below the basic exemption limit (₹2.5 lakh old regime / ₹4 lakh new regime).
• Form 15H - for senior citizens. Only one condition: the tax on your estimated total income is nil. With the new regime's ₹12 lakh rebate, a retiree with ₹10 lakh of interest and pension can validly file 15H - the old "interest must be under the exemption limit" test does not apply to 15H.

A false declaration is an offence, and the department cross-checks 15G/15H filings against the return. If you are unsure whether your tax will be nil, let the TDS happen and claim the refund - it comes back with interest.

The two deductions: 80TTA (₹10,000) and 80TTB (₹50,000)

Both apply only in the old regime (merged into Section 153 of the Income-tax Act 2025):

• 80TTA - individuals under 60 and HUFs: up to ₹10,000 of interest from savings accounts only (bank, post office, co-operative bank). FD and RD interest do not qualify.
• 80TTB - resident senior citizens: up to ₹50,000 of interest from savings accounts, FDs, RDs and post office deposits combined. A senior citizen claims 80TTB instead of, not in addition to, 80TTA.

In the new regime, neither exists. For a senior citizen with ₹3 lakh of FD interest choosing between regimes, 80TTB is worth ₹50,000 of deduction - ₹10,400 at the 20% band - and it combines with the higher old-regime basic exemption of ₹3 lakh. Even so, for most retirees the new regime's ₹12 lakh rebate now outweighs both - our senior citizen guide works through the comparison.

Interest and the ₹12 lakh rebate: the headroom question

Under the new regime, interest counts towards the ₹12 lakh Section 87A limit like any other income. That creates a headroom figure worth knowing:

Cross the line and marginal relief kicks in: taxable income of ₹12,25,000 (say ₹12 lakh salary plus ₹1 lakh interest) pays ₹26,000, not the ₹66,300 the slabs would give - but every rupee of interest between ₹75,000 and about ₹1,46,000 in that example is taxed at close to 100%. If you are near the limit, moving deposits into PPF (exempt), or into a debt fund where nothing is taxable until you redeem, keeps you inside the rebate.

Reporting interest correctly in the ITR

1. Download the AIS from the e-filing portal in June. It lists interest from every bank and post office, by payer, on an accrual basis. Treat it as the floor.
2. Add anything the AIS misses - interest from private loans, some co-operative societies, or a bank that misreported.
3. Report the total under "Income from other sources", with savings interest shown separately so the 80TTA/80TTB claim (old regime) can be applied.
4. Claim the TDS from Form 26AS. If the bank deducted TDS on accrued interest you have not yet declared (because you follow the receipt basis), you can still claim the TDS in the year it appears - but be consistent.
5. If the extra tax exceeds ₹10,000, remember advance tax next year - or declare the interest to your employer so it is TDS-ed with salary.

Frequently asked questions