FD Interest Taxation In India 2026 Explained With TDS Rules And Tax Rates

How Is FD Interest Taxed In India?

Fixed deposits (FDs) interest is taxable under the head ‘Income from Other Sources’ under the Income-tax Act, 2025, Section 92.¹

The FD interest taxation depends on your total taxable income and the applicable tax regime. The interest is added to your total taxable income and taxed at the applicable slab rate under your chosen tax regime.²

Is FD Interest Taxable Even If TDS Is Not Deducted? 

Yes, FD interest is taxable even if TDS is not deducted. TDS is only a method of collecting tax at source and does not determine whether the interest is taxable. FD interest must be considered while calculating your total taxable income and reported accordingly.³

If your interest falls below the applicable TDS threshold, the bank may not deduct TDS on FD interest, but you may still have a tax liability based on your total income and applicable tax slab.

FD TDS Rules In 2026 

Effective from 1 April 2026, under the Income-tax Act 2025, FD TDS rules 2026 are governed by Section 393. This replaces the corresponding TDS provision under Section 194A of the Income-tax Act 1961.⁴

The FD interest TDS rate remains 10% when PAN is furnished and 20% without PAN. The Income Tax Department states that TDS rates and monetary thresholds were largely retained during the transition.

These thresholds determine when FD interest TDS is deducted⁵ :

• INR 1,00,000 in the case of a senior citizen
• INR 50,000 in the case of a person other than a senior citizen

How Much Tax Do You Pay On FD Interest?

The fixed deposit tax calculation includes each and every interest you earn during the year under “Income from Other Sources” in your Income Tax Return (ITR), even if the FD has not matured. Then the combined taxable income determines the applicable slab rates.

For example, Kabir, a 45 years old banker, has an FD and earns salary income under the new tax regime:

The interest on FD, INR 70,000, takes the total taxable income from INR 16.30 lakh to INR 17 lakh. Since both amounts fall within the INR 16 lakh to INR 20 lakh slab, the interest amount is taxed at the 20% rate. After the 4% cess, the estimated tax on FD interest is INR 14,560.

TDS Deducted vs Final Tax Payable

Here, if the bank deducts 10% TDS, INR 7,000 is deducted from the interest amount of INR 70,000. However, this is not the final tax on FD interest.

The TDS amount is adjusted against your total tax when you file your ITR. The estimated tax on FD interest, in this example, is INR 14,560, which leaves INR 7,560, subject to the overall tax calculation of the taxpayer.

FD Interest Tax Under The Old And New Tax Regimes 

FD interest income tax is applicable under both the old and new tax regimes. The main difference is that the old regime allows various deductions and exemptions, while the new regime has lower slab rates but fewer deductions.

How To Calculate Post-Tax FD Returns 

To calculate your post-tax FD return, you first need to calculate the interest earned and then account for the tax applicable to that additional income. The actual tax liability depends on your total taxable income, deductions, exemptions and applicable slab.

The post-tax FD return is calculated as,

Post-tax FD return = FD interest rate × (1 - applicable tax rate)

Let us say, if your FD earns 7% annually and the applicable tax rate is 20%,

Post-Tax Return = 7% × (1 - 20%) = 5.6%

On an investment of INR 8,00,000, the annual interest would be INR 56,000 before tax. At an assumed 20% tax rate, the illustrative tax on this interest would be INR 11,200, leaving INR 44,800 after tax.

Here is an illustration of estimated annual post-tax returns at different FD interest rates and assumed income tax rates: 

The above chart is illustrative for FY 2026-27 and assumes tax rates. It excludes the health and education cess, surcharge and deductions. The actual fixed deposit interest tax will therefore depend on your total taxable income and the selected tax regime.

How FD Interest Is Reported While Filing ITR 

You can report FD interest through the Income Tax e-Filing Portal by declaring the gross interest income under Income from Other Sources.

1. Gather and verify documents: Check your AIS, Form 26AS and interest certificates from all banks to verify the interest earned and TDS deducted during the financial year.

2. Calculate gross FD interest: Calculate the gross interest by adding all the interest earned across all your FDs. The interest accrued on cumulative FDs during the financial year is also considered, even when the interest has not yet been received.

3. Select the applicable ITR form: Choose the ITR form applicable to your overall income and eligibility, such as ITR-1 or ITR-2. Go to Income from Other Sources (Schedule OS).

4. Report the FD interest: Enter the aggregate gross interest from bank deposits in the relevant interest-income field under Schedule OS. The income will form part of your total taxable income.

5. Claim TDS credit: You can also verify the TDS deducted by your bank in the TDS schedule against Form 26AS and AIS and claim the amount as credit against your final tax liability.

Conclusion

Tax on FD interest affects the overall returns you earn after tax. While your interest may not be subject to TDS, accrued interest still forms part of your taxable income and attracts tax at your applicable slab rate.

Therefore, verifying your interest income through AIS and Form 26AS, reporting the gross amount in your ITR and claiming eligible TDS credit helps you to account for your FD income accurately.

FAQs 

Author

Lakshmi Sundari

Lakshmi is a finance writer with over three years of experience in financial content. She holds an MBA in Finance and writes on investing, personal finance and fixed-income markets. Her work focuses on explaining financial developments and investment concepts through research-backed, practical writing.