Fixed deposits offer guaranteed returns in the form of interest and are considered one of the preferred investment options for senior citizens with a low-risk profile. Additionally, fixed deposits provide the option to receive regular interest payouts, which can supplement or act as a pension for senior citizens. However, the interest earned on such fixed deposits may be subject to Tax Deducted at Source (TDS).
TDS, or Tax Deducted at Source, means the bank takes out tax directly from the interest you earn on your fixed deposits (FDs). TDS on fixed deposits for senior citizens (aged 60 and above) is only applicable if the interest exceeds ₹50,000 in a financial year. If it exceeds this limit, the bank deducts 10% tax on the extra amount.
TDS on fixed deposits for senior citizens is deducted by banks and financial institutions at the time of crediting interest to the depositor's account. If the interest exceeds the specified threshold, the bank is responsible for withholding the tax before disbursing the remaining amount to the account holder.
The legal framework governing TDS for senior citizens includes provisions under Section 194A of the Income Tax Act 1961. This specifies that TDS on fixed deposit for senior citizens will be deducted if the total interest from all FDs exceeds ₹50,000 annually for them. Additionally, if a depositor does not provide their Permanent Account Number (PAN), a higher TDS rate of 20% may apply.
To calculate TDS on FD interest for senior citizens, you need to determine the total interest earned from all FDs in a financial year. If this amount exceeds ₹50,000, TDS will be applied.
For example, if a senior citizen earns ₹70,000 in interest, TDS would be calculated as follows:
Taxable Amount: ₹70,000 - ₹50,000 = ₹20,000
TDS Deduction: 10% of ₹20,000 = ₹2,000
Senior citizens must report fixed deposit (FD) interest as income while filing their income tax returns (ITR). If TDS has been deducted, they can claim it as prepaid tax against their total tax liability.
If their total income is below the taxable limit, they can submit Form 15H to the bank to avoid TDS deductions. Finally, they need to pay any remaining tax or claim a refund based on their total income and TDS deductions.
Tax on FD interest income is typically due when filing annual income tax returns. If TDS for senior citizens fixed deposit has been deducted throughout the year, it will be accounted for during this process.
Senior citizens can avoid TDS by submitting Form 15H to their bank if their total income falls below the taxable limit. This form acts as a self-declaration that their income is not liable for tax, thus exempting them from TDS deductions.
Form 15H is a self-declaration form used by resident senior citizens (aged 60 years and above) in India to request an exemption from Tax Deducted at Source (TDS) on interest income, provided their total income is below the taxable limit.
This form is crucial for seniors who primarily rely on interest from fixed deposits and wish to avoid unnecessary tax deductions. Unlike Form 15G, which is for individuals below 60 years, Form 15H specifically caters to senior citizens, allowing them to maintain their financial resources without TDS deductions if their tax liability is nil.
Example 1: Basic Submission
Name: Mr. Sharma
Age: 65
PAN: ABCDE1234F
Estimated Income: ₹2,00,000
Previous Year’s Income: ₹1,80,000
Mr. Sharma fills out Form 15H declaring that his total income, including interest from fixed deposits, is below the basic exemption limit. He submits this form to his bank at the beginning of the financial year.
Example 2: Multiple Submissions
Name: Mrs. Verma
Age: 70
PAN: XYZAB5678C
Estimated Income: ₹3,00,000
Previous Year’s Income: ₹2,90,000
Mrs. Verma has multiple fixed deposits across different banks. She submits Form 15H to each bank where she holds deposits to ensure no TDS is deducted on her interest income.
To fill an offline form:
Visit your bank branch and request Form 15H
Fill in your personal information such as name, PAN, age, and address
Mention the financial year for which you are submitting the form, like 2024-2025
Provide estimated income for the current year and previous year's tax payable income
Sign and date the form to confirm that all information provided is accurate
Some banks also provide online form filling facility through their internet banking portals. To fill an online form:
Visit your bank internet banking portal or app
Log in to your internet banking account
Go to the 'Tax Services' or 'TDS' section
Locate the option to submit Form 15H
Senior citizens can submit Form 15H to declare that their total income is below the taxable limit, avoiding TDS on FD interest
Spread your fixed deposits across multiple banks to keep interest earned from each under ₹50,000, reducing TDS liability
Start FDs in a way that splits interest earnings across two financial years, keeping yearly interest under the TDS threshold
Open FDs in different accounts, like personal and HUF accounts, to manage interest income separately
Opt for tax-saving FDs with a five-year lock-in to claim deductions under Section 80C, reducing your taxable income
Here is a closer look at some of the important points to remember about TDS on fixed deposit for senior citizens.
TDS on fixed deposits for senior citizens is deducted at the time of credit of interest and not upon the maturity of FD. So, if you have an FD investment for 3 years, the TDS on FD interest will be deducted at the end of each year.
The rate of tax deduction for resident Indians is 10% (or 20% if you have not provided the PAN).
In case of non-resident Indians under an NRO account, the rate of TDS on fixed deposits for senior citizens is 30%.
The Government of India provides benefits for senior citizens while filing their ITRs too. In addition to the above pointers about TDS on fixed deposits for senior citizens, you should also know the following important details about Income Tax Return (ITR) filing.
As per the old tax regime, the basic exemption limit for senior citizens (aged 60 years but below 80 years) is set at ₹3,00,000 and for super senior citizens (aged 80 years and above) at ₹5,00,000
You need not file ITRs if your income is below the basic exemption limit
As per section 194P of the Income Tax Act, 1961, if you are a resident senior citizen above 75 years of age, you will be exempt from filing ITRs if you only have pension and interest as a source of income.
It is important to know about TDS on fixed deposit interest for senior citizens if you are over 60 years and wish to invest in an FD. The details given above should help you understand what this tax is and how it works.
FAQs
Is tax deducted on FD interest for all senior citizens?
No, tax is deducted on fixed deposits for senior citizens only if the total interest earned during a year exceeds ₹50,000.
Can I get a refund of the tax deducted on FDs for senior citizens?
Yes, if your overall tax liability for the year is zero, you can claim a refund of the tax deducted while filing your Income Tax Return.
When should Form 15H be submitted?
Form 15H should ideally be submitted at the beginning of the financial year to prevent TDS deductions on interest income.
What happens if I do not submit Form 15H?
If Form 15H is not submitted and the interest income exceeds ₹50,000, the bank will deduct TDS at the applicable rate.
What if my total income falls below the taxable threshold after interest is credited?
If your total income falls below the taxable threshold after interest is credited, you can claim a refund of the TDS deducted by filing your income tax return.
How long does it take to get a TDS refund?
The time to receive a TDS refund can vary, but it typically takes about 2 to 6 weeks after filing your income tax return.
Are there any penalties for incorrect information on Form 15H?
Yes, providing incorrect information on Form 15H can lead to penalties under Section 277 of the Income Tax Act.
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