A bank deducts 10% TDS once the interest you earn from it in a year crosses ₹50,000 (₹1 lakh for senior citizens). If your total income is below the taxable limit, you can give the bank Form 121 – which replaces Forms 15G and 15H from tax year 2026-27 – so it doesn’t deduct tax.
The rules
| Rule | |
|---|---|
| Rate | 10% of the interest |
| Limit (under 60) | ₹50,000 interest a year from one bank |
| Limit (60 and above) | ₹1,00,000 interest a year from one bank |
| No PAN with the bank | Higher rate (20%) |
| Covers | Fixed deposits and recurring deposits; not savings account interest |
| Section | Section 393 of the Income-tax Act, 2025 (old Section 194A) |
The limit is checked per bank, across all branches – not per deposit. Splitting deposits between branches of the same bank does not help.
Example
A 65-year-old earns ₹1.2 lakh interest from one bank. Since it is above ₹1 lakh, the bank deducts 10% = ₹12,000. If her total income is below the taxable limit, she gets this back as a refund when she files her return – or she could have avoided it by giving Form 121 at the start of the year.
Form 121 (formerly 15G/15H)
- It is a self-declaration that your estimated tax for the year is nil.
- Submit it to each bank at the start of the tax year (or before the first interest credit). Most banks accept it online.
- Seniors can usually use it when tax after rebate is nil. For people under 60 the conditions are stricter, so check before you sign.
- A false declaration is an offence – don’t sign it just to avoid TDS if you do owe tax.
TDS is not the final tax
- Show all interest in your return, even if no TDS was cut. It is taxed at your slab rate.
- Check Form 26AS and your Annual Information Statement (AIS) to match the TDS credit.
- If TDS is more than your tax, claim the difference as a refund. If your slab is higher than 10%, pay the balance.
Ways to reduce tax on interest
- Seniors in the old regime can deduct up to ₹50,000 of deposit interest (old Section 80TTB).
- Spread deposits across family members who have lower incomes – keeping clubbing rules in mind.
- Consider PPF, where interest is tax-free.
Estimate interest in advance with the FD calculator and see FD vs RD.
Frequently asked questions
When does a bank deduct TDS on FD interest?
When your total interest from that bank in a year crosses ₹50,000, or ₹1 lakh for senior citizens. The rate is 10%.
What replaced Form 15G and 15H?
Form 121, from tax year 2026-27. It is a self-declaration that your tax for the year is nil.
How do I get excess TDS back?
Claim it as a refund in your income tax return after checking Form 26AS and your AIS.