Fixed Deposit (FD) is a popular investment option in India, which provides safe and guaranteed returns to investors. Before investing in FDS, it is important to know how income tax is applied and when income tax can come. In the year 2025, in the budget, changes have been made in the Tax deducted at source (TDS) rules on FDS, which is necessary for investors to know.
Interest rates on FDS are usually between 5% to 8% per year, depending on the duration of investment and financial institutions. Investors prefer FDS due to their capital security, regular returns, and ease of investment. However, these benefits also have responsibilities of taxation and reporting.
In the budget of 2025, the range of TDS has been changed on FDS. Now the limit of TDS for ordinary citizens has been increased from ₹ 40,000 to ₹ 50,000 per financial year, while for senior citizens this limit has increased from ₹ 50,000 to ₹ 1,00,000 per financial year. This change will be effective from 1 April 2025.
Fixed Deposes (FD) and Income Tax Limit 2025
The table below gives details of TDS and Income Tax Limit 2025 on FDS:
| Description | Rules and limitations |
| TDS limit (general citizen) | ₹ 50,000 per financial year |
| TDS Seema (Senior Citizens) | ₹ 1,00,000 per financial year |
| TDS rate (PAN is available) | 10% |
| TDS Rate (PAN not available) | 20% |
| SFT reporting limit | Total deposit of more than ₹ 10 lakh |
| Form 15G/15h | If the income is below the tax-free limit, TDS can be saved |
| Tax deduction (section 80C) | Tax saver FD invested up to ₹ 1.5 lakh |
When can the income tax notice come on fixed deposits?
Income tax notice usually comes when your income is higher than the tax-free limit or when a discrepancy is found in the information given by you. If your FD’s interest is higher than the income limit of income TDS, then you have to file income tax returns. Apart from this, if your total deposit is more than ₹ 10 lakh, then your transaction information can be reported under Statement of Financial Transactions (SFT).
Importance of Form 15G and Form 15H
If your total income is below the tax-free limit and you feel that you do not have any tax payable, you can submit Form 15G (for ordinary citizens) or Form 15H (for Senior Citizens) in your bank. This will not deduct TDS on your FD interest.
Tax deduction options
You have the option to avail tax deduction by investing in tax saver FD under section 80C. The amount invested in this scheme is tax-free up to ₹ 1.5 lakh, but the tax on interest income will be payable. Senior Citizens can avail a deduction of up to ₹ 50,000 on FD interest under Section 80TTB.
Taxation process on fixed deposits
Interest income on FDS is shown in income tax returns under “Income from Other Sources”. If your income is more than the tax-free limit, you have to file income tax returns. The rate of TDS is usually 10%, but if you do not have PAN, this rate becomes 20%.
Fixed Deposit & SFT Reporting
If your total FD deposit is more than ₹ 10 lakh, then your transaction information can be reported under SFT. This reporting is done by financial institutions and is aimed at preventing tax evasion.
conclusion
Fixed deposit is a safe investment option, but it is important to understand the taxation and reporting rules associated with it. The change in the range of TDS in the year 2025 has brought some relief to investors, but it is necessary to file income tax returns and follow SFT reporting rules.
Important things
- TDS limit: ₹ 50,000 for ordinary citizens and ₹ 1,00,000 per financial year for senior citizens.
- TDS Rate: PAN is available 10%, otherwise 20%.
- SFT Reporting: At a total deposit of more than ₹ 10 lakh.
- Tax deduction: Available under section 80C and section 80TTB.
Suggestions to avoid income tax notice
- File income tax returns: If your income is more than tax-free limit, it is mandatory to file income tax returns.
- Submit Form 15G/15H: If your income is below the tax-free limit, submit the form to save TDS.
- Keep in mind SFT reporting: SFT reporting can occur on deposits of more than ₹ 10 lakh.
final thoughts
It is important to understand taxation and reporting rules before investing in fixed deposits. This will help you to avoid income tax notice and your investment will be safe.
Disclaimer: This article is to provide general information and should not be taken as any specific financial advice. It would be appropriate to consult a professional for personal financial advice.
