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What is TDS on FD Interest and How to Avoid It (Form 15G/15H)

Last Updated: 2026-06-27 7 min read

Fixed Deposits (FDs) are a staple in Indian households due to their safety and predictability. However, many depositors are surprised to find that the interest they receive at maturity is less than what was calculated in their deposit receipt.

The culprit behind this discrepancy is Tax Deducted at Source (TDS). Under Indian tax laws, banks are required to deduct tax at source on the interest income you earn before crediting it to your account.

If your overall annual income is below the taxable threshold, this TDS deduction is unnecessary, forcing you to wait for a tax refund from the government. Fortunately, you can prevent this by submitting Form 15G or Form 15H. This guide explains the TDS limits on FDs and shows you how to use these forms to protect your interest earnings.

1. The Rules of TDS on Fixed Deposits

Banks do not deduct TDS on all interest payouts. Deductions are only triggered if your interest income exceeds specific statutory limits in a financial year:

  • For Regular Depositors (Under 60 Years): TDS is deducted if your total interest income across all branches of a bank exceeds ₹40,000 in a financial year.
  • For Senior Citizen Depositors (60 Years & Above): TDS is deducted if your total interest income exceeds ₹50,000 in a financial year (under Section 80TTB).

The TDS Rates:

  • Standard Rate: 10% of the interest earned.
  • Without PAN: If you have not provided your Permanent Account Number (PAN) to the bank, the TDS rate doubles to 20%. Always ensure your PAN is linked to your bank account to avoid this penalty.

2. What are Form 15G and Form 15H?

Form 15G and Form 15H are self-declaration forms that you submit to the bank. By signing these forms, you declare that your annual taxable income is below the tax-free limit, thereby requesting the bank not to deduct any TDS on your interest income.

A. Form 15G (For Regular Depositors)

You can submit Form 15G if you meet both of the following conditions:

  1. You are an individual or Hindu Undivided Family (HUF) under the age of 60 years (and a resident Indian).
  2. Your total interest income for the financial year is less than the basic exemption limit.
  3. Your net tax liability on your total income for the financial year is completely Nil.

B. Form 15H (For Senior Citizens)

You can submit Form 15H if you meet the following conditions:

  1. You are a resident Indian aged 60 years or above.
  2. Your net tax liability on your total income for the financial year is completely Nil.
  3. Note: Unlike Form 15G, Senior Citizens can submit Form 15H even if their total interest income exceeds the basic exemption limit, provided their final calculated tax liability for the year is zero (due to deductions like Section 80C, 80D, or 80TTB).

3. When and How to Submit the Forms

To prevent banks from deducting TDS, timing is critical:

  • Submit Early: You should submit Form 15G or 15H at the beginning of every financial year (in April). If you submit it late and the bank has already deducted TDS, the bank cannot refund the amount. You will have to file your Income Tax Return (ITR) to claim a refund from the Income Tax Department.
  • Submit to Each Bank: If you have FDs spread across three different banks, you must submit a separate declaration form to each bank.
  • Online Submission: Most major commercial banks allow you to submit Form 15G/15H online via internet banking or mobile apps, eliminating the need to visit a branch.

4. Common Misconceptions

A major point of confusion is the relationship between TDS and final tax liability:

Important Warning: Submitting Form 15G or 15H prevents TDS, but it does not make your interest income tax-free.

If your total income (including FD interest) eventually exceeds the tax-free threshold by the end of the year, you are still liable to pay tax on that interest when filing your ITR. Submitting these forms when you actually have tax liability is a compliance violation and can attract interest penalties under Section 234B/234C.

To compare how FD returns (after accounting for tax and TDS drag) stack up against tax-free government options like PPF or market-linked mutual funds, check out our tools:

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