Tax on Fixed Deposit Interest: How to Calculate FD Interest Tax & File ITR in 2026

Updated on Friday, August 14th, 2026 | By IndusInd Bank

Summary

1. FD interest is taxable every year and gets added to your total income based on your applicable tax slab.
2. TDS deducted by the bank is only an advance tax, so the full FD interest must still be reported in your ITR.
3. Eligible taxpayers can claim deductions such as ₹50,000 under Section 80TTB and up to ₹1.5 lakh under Section 80C on Tax Saver FDs.

File your ITR accurately by adding interest from all FDs, matching it with AIS/Form 26AS, adjusting TDS and claiming any refund due.

Fixed Deposits (FDs) are one of the most trusted investment options for individuals looking for predictable returns and capital safety. However, while the interest earned on an FD adds to your income, it also comes with tax implications that every investor should understand. Whether you’ve invested in one FD or multiple deposits across different banks, reporting the interest correctly in your Income Tax Return (ITR) is essential to avoid notices, penalties or unnecessary tax outgo.

This guide explains how income tax on FD works, how TDS on FD is deducted, the deductions available and the step-by-step process to report FD interest while filing your ITR for FY 2025-26 (AY 2026-27).

Is Fixed Deposit Interest Taxable in India? FD Interest Tax Rules Explained

Yes, interest earned on a Fixed Deposit is taxable in India. While the principal amount invested remains unaffected, the interest earned is treated as taxable income and must be reported in your Income Tax Return for the relevant financial year.

The tax payable depends on your applicable income tax slab and not on the interest rate offered by the bank. Therefore, two investors earning the same FD interest may pay different amounts of tax based on their taxable income.

FD Interest Is Taxed as “Income from Other Sources”-Income Tax on FD

Under the Income Tax Act, interest earned from Fixed Deposits is classified as “Income from Other Sources.” This means it forms part of your total taxable income and is taxed according to the slab applicable to you.

Even if the bank deducts TDS on your FD interest, you are still required to disclose the entire interest income while filing your ITR.

Tax on FD Interest Is on Accrual Basis-Not Just When You Withdraw

A common misconception is that tax becomes applicable only when an FD matures. In reality, FD interest is generally taxable on an accrual basis.

This means the interest earned during a financial year should be reported as income for that year, irrespective of whether you have withdrawn it or allowed it to accumulate until maturity.

FD Interest Tax Under Old vs New Tax Regime-Which Is Better?

The taxation of FD interest remains slab-based under both the old and the new tax regimes. However, the availability of deductions differs between the two.

Under the old regime, eligible taxpayers may claim deductions such as Section 80TTB for senior citizens and Section 80C for investments made in 5-year Tax Saver FDs. The new tax regime offers lower tax rates but restricts most deductions. Choosing the right regime depends on your overall income, investments and eligible deductions.

How Is TDS on FD Deducted? TDS Rate on Fixed Deposit Interest

Banks are required to deduct Tax Deducted at Source (TDS) on FD interest if it exceeds the prescribed threshold during a financial year. However, TDS is only a mechanism for tax collection and should not be confused with your final tax liability.

If your total tax payable is higher than the TDS deducted, you’ll need to pay the balance while filing your return. Conversely, if excess tax has been deducted, you can claim a refund.

TDS Rate on FD-10% If Interest Exceeds ₹40,000 (₹50,000 for Senior Citizens)

If the aggregate interest earned from Fixed Deposits with a bank exceeds the applicable threshold during the financial year, the bank generally deducts TDS at 10%, provided your PAN is correctly linked.

These thresholds are subject to prevailing income tax provisions and should be checked for the relevant assessment year.

TDS on FD at 20%-What Happens If PAN Is Not Linked

If your PAN is not furnished or is inoperative as per applicable income tax provisions, the bank may deduct TDS at a higher rate, which can significantly reduce the amount credited to you.

Ensuring that your PAN details are updated with the bank can help avoid unnecessary deductions.

How to Check TDS Deducted on Your FD Interest-Form 26AS & AIS

Before filing your ITR, verify the TDS deducted by the bank using Form 26AS and the Annual Information Statement (AIS) available on the Income Tax e-filing portal.

Cross-checking these records with your bank’s interest certificate helps identify any discrepancies before submitting your return.

How to Avoid TDS on FD Interest-Form 15G & 15H for FD Explained

If your total taxable income falls below the basic exemption limit, you may be able to prevent TDS from being deducted by submitting the appropriate declaration form to your bank.

This ensures that tax isn’t deducted unnecessarily when your overall income does not attract income tax.

Who Can Submit Form 15G for FD? (Non-Senior Citizens Below Taxable Limit)

Resident individuals below 60 years of age whose estimated total income is below the taxable limit can submit Form 15G, subject to the prescribed conditions.

The declaration informs the bank that no tax is expected to be payable for the financial year.

Who Can Submit Form 15H for FD? (Senior Citizens 60+)

Resident senior citizens aged 60 years or above can submit Form 15H if they satisfy the conditions specified under the Income Tax Act.

This helps eligible senior citizens avoid TDS on FD interest when their final tax liability is nil.

15G 15H Form for FD-Deadline, Submission Process & What If You Miss It

Ideally, Form 15G or Form 15H should be submitted at the beginning of every financial year or before the bank credits the first interest payment.

If you miss the deadline and TDS is deducted, you can still claim the deducted amount as a refund while filing your Income Tax Return, provided you are otherwise eligible.

Can You Submit 15G/15H If You Have FDs in Multiple Banks?

Yes. However, the declaration must be submitted separately to every bank where you hold eligible Fixed Deposits. You should also ensure that the declaration accurately reflects your estimated total income for the financial year.

How to Calculate Income Tax on FD Interest-FD Tax Calculation with Example

Calculating the tax payable on your FD interest is relatively straightforward once you know the total interest earned and your applicable tax slab. Following a structured approach can help you estimate your tax liability accurately and avoid errors while filing your ITR.

Step 1-Add Up FD Interest from All Banks for the Financial Year

Begin by calculating the total interest earned from every Fixed Deposit held during the financial year. This includes FDs across different banks and branches, regardless of whether the interest has been credited to your savings account or reinvested.

The easiest way to determine this is by referring to your FD interest certificates, bank statements and Annual Information Statement (AIS).

Step 2-Add FD Interest to Your Total Taxable Income

Once you’ve calculated the total interest earned, add it to your income from other sources such as salary, pension, rental income or business income, as applicable.

This combined amount forms part of your gross taxable income for the financial year.

Step 3-Apply Your Income Tax Slab Rate for FD Interest Tax

FD interest is taxed according to your applicable income tax slab. There is no separate or concessional tax rate exclusively for Fixed Deposit interest.

Therefore, the higher your taxable income, the higher the tax payable on your FD earnings.

Step 4-Deduct TDS on FD Already Paid by the Bank

If your bank has already deducted TDS on your FD interest, subtract that amount from your total tax liability while filing your Income Tax Return.

If the TDS deducted is lower than your actual tax liability, you’ll need to pay the balance tax. On the other hand, if excess TDS has been deducted, you can claim a refund after filing your return.

FD Tax Calculation Example-₹60,000 FD Interest in 20% Slab

Suppose you earned ₹60,000 as interest from Fixed Deposits during the financial year and fall under the 20% income tax slab.

• FD Interest Earned: ₹60,000
• Applicable Tax Rate: 20%
• Income Tax on Interest: ₹12,000 (excluding cess and surcharge, if applicable)

If your bank has already deducted ₹6,000 as TDS, you’ll need to pay the remaining tax while filing your ITR. Similarly, if excess tax has been deducted, the difference can be claimed as a refund.

Deductions Available on FD Interest Income-80TTA, 80TTB & 80C

Although FD interest is taxable, certain deductions may be available depending on your age, investment type and the tax regime you have opted for.

Section 80TTA-₹10,000 Deduction on Savings & FD Interest (Under 60, Old Regime)

Section 80TTA allows resident individuals below 60 years of age to claim a deduction of up to ₹10,000 on interest earned from eligible savings accounts under the old tax regime.

However, this deduction does not apply to interest earned from Fixed Deposits.

Section 80TTB-₹50,000 Deduction for Senior Citizens on FD Interest (Old Regime)

Resident senior citizens can claim a deduction of up to ₹50,000 under Section 80TTB on interest earned from deposits with banks, post offices and cooperative banks under the old tax regime. This includes eligible Fixed Deposit interest.

Section 80C-Deduction on 5-Year Tax-Saving FD Principal (Up to ₹1.5 Lakh)

Investments made in a 5-year Tax Saver Fixed Deposit qualify for deduction under Section 80C, subject to the overall limit prescribed under the Income Tax Act.

It is important to note that this deduction applies only to the investment amount and not to the interest earned.

Are Any FD Interest Tax Deductions Available Under the New Tax Regime?

The new tax regime offers lower tax rates but restricts several deductions available under the old regime. Taxpayers opting for the new regime should evaluate whether the lower tax rates outweigh the benefits of deductions before making their choice.

Also Read : Fixed Deposit Tax Deduction Available under Section 80C of the Income Tax Act

How to File ITR for FD Interest-Step-by-Step Guide to Reporting FD Interest in ITR

Reporting FD interest correctly ensures accurate tax computation and helps avoid notices due to mismatches with tax department records.

Step 1-Collect FD Interest Certificates from All Banks

Obtain annual interest certificates from every bank where you maintain Fixed Deposits. These certificates provide the total interest credited during the financial year.

Step 2-Cross-Verify FD Interest with Form 26AS, AIS & TIS

Compare the figures mentioned in your interest certificates with Form 26AS, the Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS) before filing your return.

Step 3-Choose the Correct ITR Form for FD Interest (ITR-1 Sahaj or ITR-2)

Select the appropriate Income Tax Return form based on your income sources and eligibility. Salaried individuals with eligible income generally file ITR-1 (Sahaj), while taxpayers with additional income sources may need to file ITR-2 or another applicable form.

Step 4-Enter FD Interest Under “Income from Other Sources” (Schedule OS)

Report the total FD interest under “Income from Other Sources” in Schedule OS of the applicable Income Tax Return form.

Step 5-Claim 80TTA/80TTB/80C Deductions on FD Interest (If Applicable)

Claim deductions under the relevant sections wherever applicable and ensure supporting documents are available if required.

Step 6-Adjust TDS on FD Credit & Calculate Tax Payable or Refund

Adjust the TDS reflected in Form 26AS against your total tax liability. This will determine whether additional tax is payable or if you’re eligible for a refund.

Step 7-Verify & Submit Your ITR Online

Once all details have been verified, submit your Income Tax Return and complete the verification process within the prescribed timeline.

Also Read : Everything You Need to Know About ITR Filing: Forms, Process & Eligibility

Common Mistakes to Avoid While Reporting Tax on Fixed Deposit Interest in ITR

Even small mistakes while reporting FD interest can result in tax notices or delayed refunds.

Not Declaring FD Interest Because TDS on FD Was Already Deducted

Many taxpayers assume that once TDS has been deducted, the income need not be reported. This is incorrect. The entire FD interest must still be disclosed in the ITR.

Reporting Only Maturity Interest Instead of Yearly Accrued FD Interest

Interest should generally be reported on an accrual basis rather than only when the Fixed Deposit matures.

Missing FD Interest from Multiple Banks or Branches

If you hold FDs with different banks, ensure that interest from every institution is included while calculating taxable income.

Mismatch Between AIS Data & Self-Reported FD Interest

Always reconcile your figures with AIS, Form 26AS and bank certificates before submitting your return to minimise discrepancies.

FD Interest Tax for Special Cases

Tax on Joint FD Interest-Who Gets Taxed?

The interest is generally taxable in the hands of the person who contributed the funds or according to the ownership of the investment, depending on the facts of the case.

Tax on FD in a Minor’s Name-Income Clubbing Provisions

Interest earned on an FD held in a minor’s name may be clubbed with the income of the parent whose total income is higher, subject to the applicable provisions of the Income Tax Act.

FD Interest Tax for NRIs-TDS Rate on FD & DTAA Benefits

Interest earned by Non-Resident Indians may be subject to different TDS provisions. Eligible NRIs may also claim benefits under the Double Taxation Avoidance Agreement (DTAA), wherever applicable.

Income Tax on FD for Senior Citizens-Additional Benefits & Exemptions

Senior citizens may benefit from higher TDS thresholds and deductions available under Section 80TTB, subject to the conditions prescribed under the Income Tax Act.

How to Claim TDS Refund on FD Interest If Excess Tax Was Deducted

When Are You Eligible for a TDS Refund on FD?

If the total TDS deducted exceeds your actual tax liability for the financial year, you can claim the excess amount as a refund while filing your ITR.

How to Claim TDS Refund on FD While Filing Your ITR

Ensure that the TDS reflected in Form 26AS is correctly claimed in your return. Once the return is processed, the Income Tax Department will issue the eligible refund.

TDS Refund Timeline-How Long Does It Take?

Refunds are generally processed after the Income Tax Return is verified and successfully processed by the Income Tax Department. The exact timeline may vary depending on the accuracy of the return and departmental processing.

Frequently Asked Questions

1. Do I Need to Pay Advance Tax on FD Interest?

If your total tax liability after considering TDS exceeds the prescribed limit, you may be required to pay advance tax as per the applicable provisions.

2. Is FD Interest Taxable If I Don’t Withdraw It?

Yes. FD interest is generally taxable on an accrual basis, even if you do not withdraw it during the financial year.

3. How to Declare FD Interest from a Closed or Matured FD in ITR?

Include the interest earned during the relevant financial year under “Income from Other Sources,” irrespective of whether the FD has matured or been prematurely closed.

4. Can I Claim Both 80C and 80TTA/80TTB Deductions Together on FD?

Yes, if you satisfy the eligibility conditions. For instance, investments in a 5-year Tax Saver FD may qualify for deduction under Section 80C, while eligible taxpayers under the old tax regime can separately claim deductions under Section 80TTB or Section 80TTA, as applicable. Understanding these provisions can help you optimise your tax planning while ensuring accurate reporting of Fixed Deposit interest in your Income Tax Return.