The Union Budget 2025 proposes an increase in the tax deduction at source (TDS) threshold for fixed deposit (FD) interest earned by general citizens (non-senior).
Currently, banks deduct TDS when the interest paid to an account holder exceeds a specified threshold in a financial year. The deduction rate is 10% if PAN details are provided.
Effective April 1, 2025, the TDS threshold will rise from ₹40,000 to ₹50,000 per financial year.
Revised TDS Thresholds Under Section 194A:
| Payer | Existing TDS Threshold | Revised TDS Threshold |
| Banking companies under the Banking Regulation Act, 1949 | ₹40,000 | ₹50,000 |
| Co-operative societies engaged in banking | ₹40,000 | ₹50,000 |
| Post office deposits under government-notified schemes | ₹40,000 | ₹50,000 |
| Other cases | ₹5,000 | ₹10,000 |
| Certain co-operative societies under Section 194A(3)(v) & (viia) | ₹40,000 | ₹50,000 |
Source: Budget Memorandum
TDS Rules & Regulations for Fixed Deposits:
As per guidelines from the Income Tax Department and HDFC Life:
- Banks and financial institutions deduct TDS on FD interest.
- TDS is deducted at a flat rate of 10% when PAN details are available.
- If PAN details are missing, the TDS rate increases to 20%.
- In the case of joint FDs, TDS is deducted from the primary account holder.
- TDS is applied at the end of each financial year when interest is credited, not just at FD maturity.
- Interest earned on Tax Saver FDs is also subject to TDS.
- All TDS deductions are recorded against the depositor’s PAN.
