If you're someone who invests in Fixed Deposits (FDs)—whether a senior citizen, a middle-class saver, or a retired investor—there’s big news for you starting FY 2025-26!
The Indian government has revised the TDS (Tax Deducted at Source) exemption limits on interest earned from FDs, especially from co-operative banks and societies. This move will directly impact your income from FDs—with potential for zero TDS deduction on higher interest earnings.
As per the Income Tax Act:
Let’s break it all down in simple terms.
What is TDS on FD Interest and Why It Matters?
Banks deduct TDS (Tax at source) on interest income above a certain limit—even if your total income is below taxable levels. This can reduce your earnings and cause unnecessary hassles while filing returns or claiming refunds.
But from FY 2025-26, things are getting better.
Updated TDS Exemption Limits on FD Interest (Effective FY 2025-26)
| Interest Paid By | Senior Citizens (₹) | Other Citizens (₹) |
|---|---|---|
| Co-operative engaged in business | 1,00,000 | 50,000 |
| Co-operative engaged in banking business | 1,00,000 | 50,000 |
| Primary Agricultural Credit Society | 1,00,000 | 50,000 |
| Co-operative Land Mortgage Bank | 1,00,000 | 50,000 |
| Co-operative Land Development Bank | 1,00,000 | 50,000 |
Compared to FY 2024-25:
| Interest Paid By | Senior Citizens (₹) | Other Citizens (₹) |
|---|---|---|
| (All above institutions) | 50,000 | 40,000 |
Result:
Who Benefits the Most?
How to Avoid TDS Deduction on FD Interest in 2025
Even with new limits, if banks don’t have proper declarations, they might still deduct TDS. Here’s how to ensure that doesn’t happen:
When to submit: At the beginning of the financial year or when opening an FD.
Pro tip: Submit it for each FD in different banks.
If your PAN is not linked, the bank will deduct TDS at 20% (instead of 10%). Avoid higher deduction by ensuring your PAN is updated in every bank account.
Banks deduct TDS based on the interest earned within a single financial institution. By distributing FDs across multiple banks, you can keep interest below exemption limits in each.
Example
Let’s say you’re a 40-year-old investor with ₹8 lakh to invest in FDs and expect to earn 6.5% annually.
Since each is below ₹50,000 (the new TDS threshold), no TDS will be deducted.
Some banks offer Tax Saver FDs under Section 80C (with a 5-year lock-in). While these are not TDS-free, they offer tax deductions on investment.
Our Expert Services Can Help You
Handling tax forms and bank communication can be time-consuming. We provide:
With 10+ years of experience, Trakintax simplify tax for everyone—from salaried professionals to senior citizens.
These new TDS exemption limits from 1st April 2025 are a welcome move for depositors, especially those investing in co-operative banks. But to fully benefit, it’s important to act smart—submit declarations, spread FDs, and stay updated.
Don’t leave your GST registration to chance.
Need help in Income tax return filling or TDS planning?
Contact us today for a free consultation.
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