For senior citizens in India, there’s an exciting update regarding Tax Deducted at Source (TDS) on Fixed Deposits (FDs). The government has announced a significant increase in the TDS exemption limit, allowing retirees and pensioners to earn higher interest income without deductions. This change brings relief to many seniors relying on FDs for their financial security.
Great News for Senior Citizens!
| Topic | Details |
|---|---|
| New TDS Exemption Limit | ₹1,00,000 per financial year |
| Previous Limit | ₹50,000 per financial year |
| Effective Date | April 1, 2025 |
| Who Benefits? | Senior citizens aged 60+ with FD interest income |
| What Happens if Interest Exceeds ₹1 Lakh? | TDS will be deducted at 10% (or 20% if PAN is not provided) |
| Form to Avoid TDS | Form 15H |
| Additional Savings Tip | Distribute FD investments across banks |
The increase in the TDS exemption limit for senior citizens’ FD interest is a huge financial relief, allowing them to earn up to ₹1,00,000 without deductions. To maximize benefits, seniors should use strategic investment planning, such as submitting Form 15H, diversifying FD investments, and opting for periodic interest payouts.
What is TDS on Fixed Deposits?
TDS (Tax Deducted at Source) is a tax deducted by banks before paying interest on fixed deposits (FDs). If your interest income exceeds a specified limit, the bank deducts TDS and deposits it with the government. You can later claim a refund if your total tax liability is lower than the deducted amount.
For senior citizens, the new TDS exemption limit has been doubled from ₹50,000 to ₹1,00,000, giving them greater financial freedom.
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How Senior Citizens Can Benefit from the New TDS Exemption
1. Higher Interest Earnings Without Tax Deduction
Previously, TDS was deducted if senior citizens earned more than ₹50,000 in interest per year. Now, they can earn up to ₹1,00,000 per year from bank FDs without TDS being applied.
Example:
- Before: If a senior citizen had an FD yielding ₹60,000 in interest, TDS was deducted at 10% (₹6,000).
- Now: The same senior citizen can earn up to ₹1,00,000 in interest without TDS deduction.
2. No Need for Frequent TDS Refunds
Many seniors had to file tax returns just to claim TDS refunds. With this new rule, fewer seniors will need to go through this process, making tax filing simpler.
3. Increased Financial Stability for Retirees
With rising inflation, senior citizens need stable income sources. By reducing the tax burden on FD interest, this change ensures they can keep more of their hard-earned savings.
How to Avoid TDS Deduction on FD Interest
1. Submit Form 15H
If your total taxable income is below the exemption limit, you can submit Form 15H to your bank. This prevents TDS deductions on your FDs.
2. Distribute Investments Across Banks
To stay within the ₹1,00,000 limit, consider spreading your FD investments across multiple banks. This ensures that no single bank deducts TDS on your total interest earnings.
3. Choose Banks with Higher Interest Rates
Different banks offer varied FD interest rates. Here’s a comparison of some banks offering the highest interest rates for senior citizens:
| Bank Name | Interest Rate | Maximum FD Amount for No TDS |
|---|---|---|
| State Bank of India (SBI) | 7.50% | ₹13,33,333 |
| HDFC Bank | 7.75% | ₹12,90,322 |
| Bandhan Bank | 8.55% | ₹11,32,751 |
| Unity Small Finance Bank | 9.50% | ₹10,52,632 |
4. Opt for Periodic Interest Payouts
Instead of choosing cumulative FD, opt for monthly or quarterly interest payouts. This ensures your annual interest does not exceed ₹1,00,000.
Tax Implications and Filing Returns
Even though TDS is not deducted on interest up to ₹1,00,000, the interest income is still taxable. Senior citizens should report this income in their tax returns and pay tax accordingly.
Example of Tax Calculation
- If total annual income (including FD interest) is below ₹3,00,000 → No tax payable.
- If total income exceeds ₹3,00,000, tax is applicable based on the applicable income tax slab.
To calculate tax liability, seniors can use the Income Tax Calculator.
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TDS Will Not Be Deducted on FD Up to This Limit FAQs
1. What is the new TDS exemption limit for senior citizens on FD interest?
The new TDS exemption limit is ₹1,00,000 per year, effective from April 1, 2025.
2. Do I still need to file taxes if my FD interest is below ₹1,00,000?
Yes, you must declare FD interest as income while filing taxes, even if no TDS is deducted.
3. What happens if my interest income exceeds ₹1,00,000?
If your interest exceeds ₹1,00,000, the bank will deduct 10% TDS. If you don’t provide your PAN card, TDS will be 20%.
4. Can I prevent TDS by submitting Form 15H?
Yes. If your total taxable income is below ₹3,00,000, you can submit Form 15H to avoid TDS deductions.
5. How do I calculate the ideal FD amount to stay below the TDS limit?
Use this formula: Ideal FD Amount = ₹1,00,000 / Bank’s Interest Rate For example, if the bank’s interest rate is 8%, then the ideal FD amount is: ₹1,00,000 ÷ 8% = ₹12,50,000
