What is the Tax on FD Interest?
FD interest is fully taxable at your slab rate — there is no special treatment. Banks deduct 10% TDS once annual interest crosses ₹50,000 (₹1,00,000 for senior citizens), but TDS is not the final tax: you still owe the difference up to your slab.
At a 30% slab, a 7.1% FD delivers only about 4.9% post-tax — often below inflation, which means a real loss of purchasing power.
Formula & worked example
Tax = Interest × slab rate × 1.04
Post-tax return = ((P + net interest)/P)1/n − 1
Worked example: ₹10,00,000 at 7.1% for 3 years matures at about ₹12.35 lakh, giving ₹2.35 lakh of interest. At a 30% slab plus cess, tax is roughly ₹73,300, leaving ₹1.62 lakh — a post-tax return of about 5.12% a year.
How to use this tax on fd interest calculator
- Enter the deposit and rate offered by your bank.
- Set the tenure; FDs compound quarterly in India.
- Choose your marginal slab — this determines the real cost.
- Select senior citizen status for the higher TDS threshold.
Smart tips
- Compare the post-tax FD return against debt funds and arbitrage funds, which can be more tax-efficient.
- Submit Form 15G (or 15H if senior) if your total income is below the taxable limit, to avoid TDS.
- Section 80TTB gives senior citizens a ₹50,000 deduction on interest income in the old regime.
- Splitting deposits across banks to dodge TDS does not avoid tax — the interest remains fully taxable.
- At a 30% slab, an FD barely beats inflation. Use FDs for safety and liquidity, not for growth.
Frequently asked questions
Is FD interest taxable in India?
Yes, fully taxable at your income tax slab rate. There is no exemption for FD interest.
What is the TDS threshold on FD interest?
₹50,000 of annual interest for those under 60, and ₹1,00,000 for senior citizens. TDS is 10% with PAN.
Does TDS mean my tax is fully paid?
No. TDS is only 10%, so if your slab is 20% or 30% you owe the difference when filing.
How can I reduce tax on FD interest?
Submit Form 15G/15H if below the taxable limit, use the 80TTB deduction if a senior citizen, or consider debt funds for better tax treatment.
Want the theory behind the numbers? Browse the Money Blog for worked guides.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: Income Tax Department — slab rates, s.87A rebate, surcharge and 4% cess, AY 2026-27 (page updated 9 Jul 2026). How we check these numbers.