Fixed Deposits (FDs) have always been a popular investment choice in India, offering stable returns and security. However, with the latest tax updates in 2025, many investors are wondering: How much investment in FD will get tax exemption, and when will you receive a notice from the Income Tax Department? This article explains everything in simple terms, helping both beginners and professionals navigate FD taxation in 2025.
Big Update on FD Tax
| Topic | Details |
|---|---|
| New TDS Threshold | ₹50,000 for general citizens, ₹1,00,000 for senior citizens |
| Income Tax Slab 2025 | Exempt up to ₹4,00,000, progressive tax rates apply |
| Tax-Saving FD Deduction | Up to ₹1.5 lakh under Section 80C |
| Penalty for Non-Disclosure | Potential notice from the Income Tax Department |
The new FD tax rules in 2025 have raised the TDS threshold, but interest remains taxable. To avoid penalties, investors must declare FD interest in their ITR, track TDS deductions, and use tax-saving strategies. If you’re a senior citizen or have a lower income, submitting Form 15G/15H can help prevent unnecessary TDS deductions.
Understanding Fixed Deposit Taxation in 2025
FDs offer assured returns, but the interest earned is taxable. The tax is deducted at the source (TDS) if it crosses a specified limit. The government has updated these thresholds for 2025, making it crucial for investors to stay informed.
New TDS Limits for FD Interest
The Tax Deducted at Source (TDS) on FD interest is applicable if the interest crosses a certain threshold:
- For General Citizens: If your FD interest exceeds ₹50,000 in a financial year, TDS will be deducted.
- For Senior Citizens (Above 60 Years): The new threshold has been raised to ₹1,00,000.
If your interest earnings stay below these limits, no TDS will be deducted. However, the interest is still taxable and must be reported in your Income Tax Return (ITR).
see also: How to Use Your Public Provident Fund for Regular Income
Income Tax Slabs 2025 (New Regime)
The new income tax regime has revised tax slabs. Here’s how your FD interest income will be taxed:
| Annual Income (₹) | Tax Rate |
|---|---|
| 0 – 4,00,000 | Nil (No Tax) |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Tax-Saving Fixed Deposits (Section 80C Exemption)
You can claim a tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act if you invest in a 5-year tax-saving FD. However, note that:
- The principal amount is exempt under Section 80C.
- The interest earned is taxable and subject to TDS if it exceeds the threshold.
How to Avoid a Tax Notice on Your FD Income
The Income Tax Department is becoming stricter with financial transactions. Here’s how you can avoid getting a tax notice for your FD investments:
1. Report Your FD Interest Income
Many investors assume that if TDS is deducted, they don’t need to declare FD interest in their ITR. This is incorrect! You must declare your FD interest under Income from Other Sources.
2. Submit Form 15G or 15H (If Eligible)
Special FD Scheme: इन दो बैंक में करें निवेश, पाएं तगड़ा रिटर्न, 8.10% मिलेगा ब्याज, डेडलाइन है 31 दिसंबर
- If your total income is below the taxable limit, submit Form 15G (for general citizens) or Form 15H (for senior citizens) to your bank to prevent TDS deduction.
3. Check Form 26AS and AIS
- Form 26AS and Annual Information Statement (AIS) track your tax deductions. Make sure the TDS deducted matches your records to avoid discrepancies.
Step-by-Step Guide to Declaring FD Interest in Your ITR
- Login to the Income Tax e-Filing Portal
- Select the Correct ITR Form: Use ITR-1 (Salaried Individuals) or ITR-2 (if you have multiple income sources).
- Go to the ‘Income from Other Sources’ Section: Enter the total FD interest earned.
- Tally with Form 26AS: Ensure the declared amount matches your TDS records.
- Claim a Refund (If Applicable): If excess TDS was deducted, you can claim a refund.
- Submit and Verify Your ITR.
see also: How to Double Your Money with a Secure Investment
Big Update on FD Tax FAQs
1. Is FD interest taxable in 2025?
Yes, FD interest is taxable and added to your total income under ‘Income from Other Sources.’ TDS applies if interest exceeds the threshold.
2. Can I avoid TDS on FD?
Yes, by submitting Form 15G (below 60 years) or Form 15H (above 60 years) if your total taxable income is below the tax limit.
3. How much FD interest is tax-free?
Interest up to ₹50,000 is tax-free for general citizens and ₹1,00,000 for senior citizens (TDS exemption limit). However, you still need to declare it in your ITR.
4. What happens if I don’t declare FD interest in my ITR?
The Income Tax Department may issue a notice for tax evasion. Unreported income can lead to penalties.
5. Can NRIs invest in tax-saving FDs?
Yes, but NRIs cannot claim deductions under Section 80C for tax-saving FDs. Their FD interest is taxed at 30% TDS.
