FD Tax Limits in FY 2025–26: ₹10,00,000 SFT Reporting, ₹1,00,000/₹50,000 TDS on Interest, Form 15G/15H, and Practical Compliance
Introduction –
Fixed Deposits (FDs) are simple, but tax compliance around FDs has two different “limit” triggers. One trigger relates to bank reporting of fresh FD placements to the Income Tax Department (which can appear in AIS/TIS). Another trigger relates to TDS on FD interest once annual interest crosses a threshold. The discussion shows that understanding these limits helps reduce avoidable TDS and follow-ups.
Main Discussion –
Fresh FD reporting (SFT) – bank-wise trigger
As per the discussion, where fresh FD placements in a financial year with a particular bank exceed ₹10,00,000, the bank may report it through SFT (Rule 114E reference). Two practical clarifications are given:
- Only “fresh” FDs are counted; renewals and maturity reinvestments are not counted as fresh for this purpose.
- The ₹10,00,000 trigger is bank-wise; different banks are not clubbed by a bank for this test.
FD interest taxation – “Income from Other Sources”
FD interest is taxable and must be included in the ITR under “Income from Other Sources”, irrespective of whether TDS is deducted.
Principal source – separate compliance focus
The discussion highlights that the department may ask for the source of the FD principal, not only the interest. If the principal cannot be explained, it can be questioned as an “unexplained investment” issue. Therefore, taxpayers should keep the source and supporting records ready.
TDS on FD interest – bank-wise thresholds
TDS is linked to interest credited/paid by a bank in a financial year. The limits stated are:
- Senior citizens: TDS when interest exceeds ₹1,00,000 in a financial year (per bank).
- Non-senior citizens: TDS when interest exceeds ₹50,000 in a financial year (per bank).
Where applicable, the discussion notes banks generally deduct TDS at 10% on the interest.
Form 15H / Form 15G – preventing TDS where eligible
Eligible taxpayers can submit a declaration so the bank does not deduct TDS, provided total tax liability is nil as per the conditions discussed: Form 15H for senior citizens and Form 15G for non-senior individuals. The timing point is to file at the start of the financial year, ideally in April.
Strategies discussed – splitting and FD laddering
Two strategies are discussed:
- Splitting FDs across multiple banks to manage the bank-wise ₹10,00,000 reporting trigger and bank-wise interest thresholds.
- FD laddering by creating multiple FDs with staggered maturities (such as 1-year, 2-year, and 3-year) to improve liquidity and reduce concentration risk, while keeping interest flows easier to monitor. A drawback noted is that interest rates can vary by tenure.
Practical Impact / Expert View –
A workable routine is: plan bank allocation at the beginning of the year; submit Form 15G/15H in April if eligible; monitor interest bank-wise; and report full interest under “Other Sources”. Common mistakes include confusing the ₹10,00,000 SFT trigger with interest TDS thresholds, filing Form 15G/15H after TDS begins, assuming limits are aggregated across banks, and not maintaining records to explain principal source.
Conclusion – key takeaways –
- ₹10,00,000: SFT reporting trigger for fresh FDs in a financial year, bank-wise.
- ₹1,00,000 / ₹50,000: annual interest limits for TDS (senior / non-senior), bank-wise.
- TDS rate discussed: 10% on interest where applicable.
- Form 15H/15G: file in April to prevent TDS if eligible.
- Disclose FD interest under “Income from Other Sources” and keep principal source explainable.
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