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The Budget 2025 has proposed raising the Tax Deduction at Source (TDS) limit on interest earned from bank fixed deposits (FDs) for general (non-senior) citizens. The current threshold of Rs 40,000 will be increased to Rs 50,000 per financial year. This change will come into effect on April 1, 2025.
Understanding TDS
Banks are mandated to deduct tax at source when the interest earned on fixed deposits exceeds a certain limit within a financial year. The threshold for TDS differs between senior and non-senior citizens. At present, banks deduct TDS at a rate of 10% on FD interest if the account holder provides their PAN.
Who is Responsible for TDS on Fixed Deposits?
As per the HDFC Life website, financial institutions or banks offering fixed deposit schemes are responsible for deducting TDS on FD interest. This deduction is typically automatic, occurring at the end of the financial year.
TDS When PAN is Not Provided
If an investor’s PAN details are not available, TDS on FD interest is deducted at a higher rate of 20%, as opposed to the standard 10%.
TDS on Joint Account FDs
For fixed deposits held in joint names, TDS is deducted only for the primary account holder. The secondary holder is not liable for TDS deductions on the FD.
Important Points to Remember About TDS on FDs
- TDS is only applicable if the interest earned on the fixed deposit exceeds the specified threshold for the financial year.
- It is the responsibility of the bank or financial institution where the FD is held to deduct TDS.
- TDS is deducted when the interest is credited, not at the time of FD maturity.
