TDS on FD Interest: Section 194A (Now Section 393) — Rates, ₹50,000/₹1 Lakh Limits & Form 121

What Section 194A is (now Section 393)

Section 194A tells any payer of interest — banks, co-operative banks, post offices, NBFCs, companies, even a landlord paying interest on a security deposit — to deduct tax at source (TDS) when it pays or credits interest to a resident. In the Income-tax Act, 2025, this rule sits in Section 393(1), Table Sl. No. 5(ii)–(iii).

The rule covers interest other than interest on securities. That means:

• Fixed-deposit (FD) and recurring-deposit (RD) interest
• Interest on company deposits and NBFC deposits
• Post-office deposit interest (MIS, time deposits, Senior Citizens Savings Scheme)
• Interest on loans and security deposits

Interest on securities (debentures, bonds) is a separate rule — Section 193, now Section 393(1) Sl. No. 5(i), with its own ₹10,000 threshold.

When is TDS taken? At the earlier of two moments: when the interest is credited to your account, or when it is paid to you. Banks usually credit FD interest every quarter, so TDS is taken each quarter as the interest is credited — not only at maturity.

Thresholds: when does TDS start?

TDS applies only if your interest from one payer crosses the limit in a financial year. From 1 April 2025 (Finance Act 2025), the limits are:

Three rules about these limits trip people up:

1. Per bank, not per branch. All branches of the same bank are one payer. If you hold FDs in two branches of the same bank, the bank adds the interest from both and compares the total with one threshold. Splitting FDs across branches of the same bank does not avoid TDS.
2. Not across banks. Each bank applies the limit separately. FDs of ₹40,000 interest each in two different banks attract no TDS at either bank — but the full ₹80,000 is still taxable income in your ITR.
3. Whole amount, not the excess. Once interest crosses the limit, TDS applies on the entire interest, not only on the part above the limit. Interest of ₹60,000 at a bank means TDS on the full ₹60,000.

What changed: before 1 April 2025, the bank limits were ₹40,000 (general) and ₹50,000 (senior citizens), and the other-payer limit was ₹5,000. The Finance Act 2025 raised all three.

TDS rate: 10% or 20%?

• PAN given to the bank: 10% of the interest.
• PAN not given: 20% of the interest. This is the old Section 206AA rule, now Section 397(2) of the 2025 Act.

The 20% rate applies even if your total income is below the taxable limit. The bank has no choice. So the first thing to check on any FD is that your PAN is linked to it.

Worked examples

Example 1 — general depositor. FD interest ₹60,000 in the year. The ₹50,000 bank limit is crossed. With PAN, TDS = 10% of ₹60,000 = ₹6,000. You receive ₹54,000.

Example 2 — senior citizen. FD interest ₹90,000. Below the ₹1,00,000 senior limit, so no TDS. If the interest were ₹1,20,000 instead, TDS = 10% of ₹1,20,000 = ₹12,000.

Example 3 — no PAN. FD interest ₹60,000, PAN not given. TDS = 20% of ₹60,000 = ₹12,000 — double the normal amount. Give the bank your PAN and the rate drops back to 10%.

Example 4 — senior citizen, old regime. FD interest ₹90,000, no other income. The Section 80TTB deduction (up to ₹1,00,000, raised in Budget 2025) covers the whole ₹90,000. Taxable FD interest = ₹0. Note that this deduction is available only in the old regime.

What is NOT covered by Section 194A

• Savings-account interest. No TDS is deducted on savings interest, however large the amount. Instead, the old regime gives a deduction of up to ₹10,000 on savings interest (Section 80TTA, now part of Section 153 of the 2025 Act).
• NRO deposits. Section 194A applies to residents only. Interest on NRO deposits of NRIs falls under Section 195, at 30% plus surcharge and cess. NRIs cannot use the Form 121 route for NRO interest.
• TDS already deducted is not the final tax. Whether the bank deducted 10%, 20%, or nothing at all, the interest itself is fully taxable. What changes is only how much tax you have already paid in advance.

How to stop TDS: Form 121

Earlier, residents used two forms: Form 15G (below 60) and Form 15H (senior citizens). From 1 April 2026, both are replaced by a single Form 121 under Section 393(6) of the Income-tax Act, 2025 (Rule 211, Income-tax Rules 2026).

Other points about Form 121:

• Only PAN is accepted. Aadhaar is not accepted on this form.
• Submit it fresh every year, at the start of the financial year, to each bank or payer where you hold deposits — and before the first quarterly interest credit if you can.
• A false declaration is serious. Anyone making a false statement in the declaration is liable to prosecution under Section 482 of the Income-tax Act, 2025. Do not file it if your tax for the year will not actually be nil.
• If you miss it, the bank deducts TDS as usual. You lose nothing permanently: claim the amount back as a refund when you file your ITR.

Reporting FD interest in your ITR

Head of income. FD and RD interest is taxable as “Income from Other Sources” in both the old and the new tax regime. TDS or no TDS, report the full interest.

Accrual vs receipt. Banks report FD interest to your AIS (Annual Information Statement) on an accrual basis each year — including cumulative FDs where the cash arrives only at maturity. Pick one method per deposit and stick to it. Accrual is the safer default because it matches AIS. Reporting a cumulative FD only at maturity, while AIS shows interest every year, is a common cause of mismatch notices.

Deductions (old regime only). Senior citizens get a deduction on deposit interest under Section 80TTB, up to ₹1,00,000 (raised from ₹50,000 in Budget 2025). Others get up to ₹10,000 on savings-account interest under Section 80TTA. Under the Income-tax Act, 2025, both deductions sit in Section 153. The new regime does not allow these deductions — the full interest is taxed at slab rates. If you are on the fence between regimes, our guide to the new tax regime slabs for FY 2026-27 shows the full comparison.

Reconcile before filing. Check Form 26AS, AIS and TIS for the TDS each bank deducted. The bank also gives you a Form 16A TDS certificate each quarter. Enter the gross interest in your ITR — the return will set off the TDS already paid. If TDS is more than your tax, the excess comes back as a refund after processing. See our step-by-step guide to checking your income tax refund status if you are waiting on one.

TDS on salary is a different rule. If your employer also deducts TDS, that runs under Section 192 (now Section 392) at slab rates — read our TDS on salary guide and the TDS on rent guide for the other two TDS rules most people meet.

Common mistakes

1. Splitting FDs across branches of the same bank to stay under the limit. The bank’s Core Banking System adds them up. It does not work.
2. Thinking “no TDS” means “no tax.” Interest below the TDS limit is still taxable. Declare it.
3. Forgetting to resubmit Form 121 every year. A form filed last year does not carry forward.
4. Not linking PAN to the FD. That alone doubles the TDS rate to 20%.
5. Reporting cumulative FD interest only at maturity while AIS shows it every year. Stay on accrual basis for that deposit.
6. Assuming one bank knows about another. Thresholds are per payer; your total income across all banks is what decides your final tax.

Frequently Asked Questions

What is the TDS rate on FD interest?
If you give your PAN, the bank deducts 10% of the total interest. Without PAN, the rate rises to 20%.

How much FD interest is tax-free / what is the TDS limit?
No FD interest is tax-free. The TDS limit is ₹50,000 a year at banks for people below 60, ₹1,00,000 for senior citizens, and ₹10,000 for other payers. Below the limit, no TDS is taken — but the interest is still taxable.

How can I avoid TDS on FD interest?
Submit Form 121 at the start of the financial year if your estimated tax for the year is nil (and, if you are below 60, your Section 393(6) income is within ₹4,00,000). Also make sure your PAN is linked to every FD.

Is FD interest taxable if no TDS is deducted?
Yes. Interest is taxable as “Income from Other Sources” whether or not TDS was deducted. You must report the full amount in your ITR.

Does TDS apply per branch or per bank?
Per bank. All branches of the same bank are treated together for the threshold. Different banks apply the limit separately.

What is Form 121 and how is it different from Form 15G/15H?
Form 121 is the single declaration that replaced Forms 15G and 15H from 1 April 2026. It works for both seniors and non-seniors, needs PAN only, and — unlike the old forms — it puts a ₹4 lakh cap on Section 393(6) income for non-senior filers. A false declaration can lead to prosecution under Section 482.

Official Sources

• Income Tax e-Filing Portal — incometax.gov.in
• Income Tax Department — incometaxindia.gov.in
• India Code — Income-tax Act, 2025 — indiacode.nic.in

Disclaimer: This article is general information, not tax advice. Tax rules change with each Budget. Check the official sources above or speak to a qualified tax professional before acting on your own situation.

Rohan Mehta

Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.