TDS on Fixed Deposits from 1st April 2026 : How to Save Tax on FD Interest
This Article outlines the new income tax regulations effective from April 1, 2026, focusing on how to manage Fixed Deposits (FD) to minimize or eliminate TDS (Tax Deducted at Source) and tax liabilities.
Key TDS and Tax Regulations:
- New Section: TDS rules for FDs will now fall under Section 393, Table 5, replacing the previous Section 194A
- TDS Exemption Limits: No TDS will be deducted if your annual interest income from a bank or post office is below these thresholds:
- Non-Senior Citizens (< 60 years): Rs 50,000
- Senior Citizens (>= 60 years): Rs 100,000
- TDS Rate: If interest exceeds these limits, banks will deduct 10% TDS on the entire interest amount
- Savings Accounts: Interest earned on savings bank accounts is not subject to TDS
Tax and Rebate Guidelines (New Tax Regime):
- Tax-Free Income: Under the new regime, individuals with a total annual income (including FD interest) of up to 1,200,000 INR may not be liable for any tax, thanks to specific rebates
Strategies to Minimize Tax and TDS:
- Form 121 (15G/15H): If your total income remains within the tax-free limit, you can submit Form 121 (formerly 15G/15H) to the bank to prevent TDS deduction
- Diversification: To stay under the TDS threshold per institution, you can distribute your FD investments across multiple banks. This ensures that the interest earned in each bank remains below the 50,000 or 100,000 INR limits
- Strategic Compounding: When setting up long-term FDs (e.g., 5 years), avoid initial lump-sum investments that cause interest to compound above the threshold. It is recommended to calcaulte the the investment amount in reverse to ensure the annual interest remains steady and below the tax/TDS trigger points .
Related Post
Form 121 Income Tax pdf download (Earlier Form 15G/ 15H) New Income Tax Rules 2026