How to Calculate TDS on Fixed Deposits

TDS on FD interest gained up to Rs. 50,000 is eligible for exemption under Section 194A for senior citizens (individuals of age 60 years and above) and Rs. 40,000 for other individuals.

FD interest gained over Rs. 5 lakh or 10 lakh is eligible for extra tax deductions of 10% and 20% respectively in addition to TDS as per the Income Tax Act, 1961.

TDS on FD is applied only in case the interest earned exceeds the threshold limits in a given financial year (only interest is subject to tax).

Banks or financial institutions are liable to deduct TDS on FD at a 10% rate on the interest earned on a fixed deposit in a given fiscal year.

20% TDS on fixed deposit is charged if an individual fails to provide PAN information relating to the FD account.

For joint account holders, fixed deposit TDS is deducted against the primary account holder’s PAN information, where the secondary account holder is not liable for any deductions relating to TDS on FD.

Relative bank or a financial institution of your fixed deposit account automatically deducts TDS on FD at the end of each fiscal year.

Interest gained from tax saver FD is also subject to TDS deduction.

Rate of Average Income Tax = Income Tax Payable (computed with slab rates) / Estimated income for the financial year.

Interest earned per year on both FDs – Rs. 60,000 (Rs. 30,000 per FD)
Interest earned in 4 years on both FDs – Rs. 60,000 * 4 = Rs. 2,40,000 (Rs. 40,000 per FD)
TDS on FD interest will be charged for both at 10% rate.
10% of Rs. 60,000 = Rs. 6000

FD holders have the option to claim TDS deduction on fixed deposits under a suitable provision of Income Tax Act. For instance, FD holders can apply for TDS waiver on their fixed deposit earnings by declaring them through Form 15G or Form 15H.