Navigating the income tax exemptions and fixed deposit (FD) limits in 2025 is crucial for individuals looking to optimize their savings and minimize tax liabilities. With new tax slab revisions and updated FD taxation policies, it is essential to stay informed to avoid unnecessary tax deductions or compliance notices from the Income Tax Department.
Income Tax Exemptions and Fixed Deposit (FD) Limits
| Key Aspect | Details |
|---|---|
| Basic Income Tax Exemption | ₹4 lakh under the new tax regime |
| Tax-Free Income Limit | ₹12 lakh (with standard deduction) |
| TDS on FD Interest (General Citizens) | ₹50,000 (raised from ₹40,000) |
| TDS on FD Interest (Senior Citizens) | ₹1,00,000 (raised from ₹50,000) |
| 5-Year Tax-Saving FD | Eligible for deduction under Section 80C (₹1.5 lakh limit) |
| Penalty for Non-Disclosure | Potential tax notices, penalties, and interest on unpaid tax |
Understanding the tax exemptions and FD limits in 2025 can help individuals maximize savings and stay compliant with tax laws. With the new income tax slabs, higher TDS thresholds, and tax-saving FD benefits, taxpayers can effectively plan their finances and avoid unnecessary tax deductions or legal complications.
Take Action: Keep track of your income sources, choose the best tax regime, and file your taxes correctly to enjoy a stress-free financial year.
New Income Tax Exemptions for 2025
The Indian government introduced revised income tax slabs in 2025, providing higher exemptions and more tax-free income under the new tax regime.
New Tax Slabs (2025-26)
| Income Range (₹) | Tax Rate (%) |
|---|---|
| 0 – 4,00,000 | Nil |
| 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 |
Important Takeaways:
- Individuals earning up to ₹12 lakh benefit from zero tax liability after deductions.
- Those earning above ₹24 lakh fall into the highest tax bracket of 30%.
see also: AU Small Finance Bank Revises Interest Rates
Old vs. New Tax Regime: Which One to Choose?
| Feature | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 |
| Tax-Free Limit | ₹5 lakh (after rebate) | ₹12 lakh (after deductions) |
| Section 80C Deductions | Yes (up to ₹1.5 lakh) | No |
| Lower Tax Slabs | No | Yes |
Tip: If you claim deductions under 80C, HRA, and other exemptions, the old tax regime may be better. Otherwise, the new regime offers a lower tax burden.
Fixed Deposit (FD) Taxation Rules in 2025
Fixed Deposits (FDs) remain a popular choice for risk-free investment, but their taxation has changed with increased Tax Deducted at Source (TDS) limits.
TDS on Fixed Deposits: New Limits
| Category | Previous TDS Limit | New TDS Limit (2025) |
|---|---|---|
| General Citizens | ₹40,000 | ₹50,000 |
| Senior Citizens | ₹50,000 | ₹1,00,000 |
Tax-Saving Fixed Deposits (5 Years)
- Qualifies for a tax deduction under Section 80C.
- Maximum deduction allowed: ₹1.5 lakh per financial year.
- Lock-in period: 5 years (premature withdrawal not allowed).
Example: If you invest ₹1.5 lakh in a 5-year FD, you can deduct this amount from your taxable income, lowering your tax burden.
How to Avoid TDS on FD Interest?
- Submit Form 15G (for individuals below taxable income limit) to your bank.
- Senior citizens should submit Form 15H to claim TDS exemption.
Will You Get an Income Tax Notice?
Many individuals unknowingly trigger tax notices by failing to report their FD interest or other income sources. Here’s how to avoid an income tax notice in 2025.
Common Reasons for Receiving a Tax Notice
- Not Reporting FD Interest: Banks report your interest earnings to the Income Tax Department.
- Mismatch in Tax Filing: If your Form 26AS and ITR don’t match, a notice may be sent.
- High-Value Transactions: Large deposits or withdrawals without a proper income source can trigger scrutiny.
- Late or Incorrect Tax Filing: Filing ITR incorrectly or missing deadlines attracts penalties.
How to Avoid a Tax Notice?
- Declare all income sources when filing your Income Tax Return (ITR).
- Ensure your Aadhaar and PAN are linked to avoid account discrepancies.
- File tax returns before the deadline (July 31, 2025, for salaried individuals).
see also: Is Your Money Safe in IndusInd Bank FDs? What You Need to Know
Income Tax Exemptions and Fixed Deposit Limits FAQs
1. What is the tax-free income limit in 2025?
The tax-free income limit is ₹12 lakh under the new tax regime, considering standard deductions.
2. Do I have to pay tax on FD interest?
Yes, FD interest is taxable as per your income tax slab. However, if your interest is below the TDS limit (₹50,000 for general citizens, ₹1,00,000 for senior citizens), no TDS will be deducted.
3. Can I avoid TDS on my FD interest?
Yes, you can submit Form 15G/15H if your total income is below the taxable limit.
4. Should I opt for the old or new tax regime?
If you claim multiple deductions (HRA, 80C, etc.), the old tax regime is beneficial. Otherwise, the new regime offers simplified and lower tax rates.
5. How do I report my FD interest in my ITR?
FD interest should be reported under ‘Income from Other Sources’ in your ITR.
