Fixed Deposit (FD) investors in India are set to benefit from new Tax Deducted at Source (TDS) rules coming into effect from April 1, 2025. These changes, announced in the Union Budget 2025, aim to provide tax relief and simplify compliance, especially for small investors and senior citizens.
Under the revised rules, the TDS threshold for interest income on Fixed Deposits (FDs) has been increased, meaning fewer people will have tax deducted at source on their earnings. This is a significant relief for investors who depend on FD interest income for their financial stability.
New TDS Rules from April 1
| Change | Previous Threshold | New Threshold (From April 1, 2025) |
|---|---|---|
| TDS on FD interest for senior citizens | ₹50,000 per year | ₹1,00,000 per year |
| TDS on FD interest for others | ₹40,000 per year | ₹50,000 per year |
| TDS on dividend income | ₹5,000 per year | ₹10,000 per year |
| TDS on lottery winnings | ₹10,000 per year (cumulative) | ₹10,000 per transaction |
| TDS on insurance commission | ₹15,000 per year | ₹20,000 per year |
The new TDS rules from April 1, 2025, bring significant relief to FD investors, particularly senior citizens and small depositors. By increasing TDS thresholds, the government aims to reduce tax burden and simplify compliance. Investors can now earn more interest without immediate deductions, making fixed deposits even more attractive. To maximize benefits, investors should stay informed, submit the necessary tax forms, and plan their deposits strategically.
Understanding the New TDS Rules: What Has Changed?
The government has revised the TDS rules to make tax compliance easier and allow individuals to keep more of their earnings. Let’s break down the major changes:
1. Higher TDS Threshold for Fixed Deposit (FD) Interest
Previously, banks deducted TDS on FD interest when earnings exceeded:
- ₹50,000 for senior citizens.
- ₹40,000 for non-senior citizens.
From April 1, 2025, the new threshold is ₹1,00,000 for senior citizens and ₹50,000 for others. This means:
- If your FD interest is below this limit, banks won’t deduct any TDS.
- Only those earning more than the threshold will have TDS deducted.
- Senior citizens, who rely heavily on interest income, will have a significant tax relief.
2. Higher Exemption Limit for Dividend Income
Previously, TDS was deducted if dividend income exceeded ₹5,000 in a year. Now, the threshold has doubled to ₹10,000. This benefits stock market investors who receive dividends from shares or mutual funds.
3. TDS on Lottery Winnings and Horse Race Bets
Previously, TDS was deducted if total winnings in a year exceeded ₹10,000. Now, TDS will be applied per transaction, not on total winnings.
- This makes it easier for casual players who win small amounts multiple times.
- Winnings under ₹10,000 per transaction will not attract any TDS deduction.
4. Increased TDS Limit for Insurance and Brokerage Commissions
- TDS on insurance commissions has increased from ₹15,000 to ₹20,000.
- This benefits insurance agents and financial advisors, reducing their immediate tax deduction burden.
see also: Post Office FD Scheme High Returns and Secure Investment in 2025
How These Changes Benefit FD Investors
1. More Money in Your Hands
With a higher threshold for TDS deductions, more investors will be able to receive full interest payouts without any tax being deducted upfront.
2. Easier Tax Compliance
If TDS is not deducted, you don’t need to claim a refund while filing your Income Tax Return (ITR). This simplifies tax filing and reduces paperwork.
3. Encourages Savings and Investment
Since investors can now earn more without losing money to TDS, it encourages higher FD investments, benefiting both individuals and banks.
How to Avoid TDS Deduction on FD Interest?
Even with the new higher limits, you can completely avoid TDS deduction by following these steps:
1. Submit Form 15G or 15H
- If your total income is below the taxable limit, submit Form 15G (for non-seniors) or Form 15H (for seniors) to your bank.
- This prevents banks from deducting TDS on your FD interest.
2. Split FD Across Banks
- If you have a large investment, split it across different banks.
- This ensures that no single bank deducts TDS if interest remains below the threshold.
3. Opt for Tax-Saving FDs
- Consider tax-saving FDs under Section 80C, which offer deductions up to ₹1.5 lakh on investments.
see also: What should be your monthly salary to get a home loan of ₹35 lakh from SBI
New TDS Rules from April 1 FAQs
Q1: Who benefits the most from the new TDS rules?
A: Senior citizens benefit the most, as their TDS threshold for FD interest has doubled to ₹1,00,000 per year.
Q2: Will I still need to file an ITR if my TDS is not deducted?
A: Yes, if your total income is above the taxable limit, you must file an Income Tax Return (ITR) even if no TDS was deducted.
Q3: Do these changes apply to both banks and post office FDs?
A: Yes, the new TDS threshold applies to all FDs, including banks, post offices, and cooperative banks.
Q4: How do I check if TDS has been deducted?
A: You can check Form 26AS on the Income Tax e-filing website or ask your bank for a TDS certificate.
Q5: Can I claim a refund if TDS is deducted incorrectly?
A: Yes, if TDS is deducted but your income is below taxable limits, you can claim a full refund while filing your ITR.
