After retirement, most senior citizens prefer Fixed Deposits (FDs) as a safe and reliable investment option. FDs offer capital protection along with a fixed monthly or yearly interest income, which makes them ideal for meeting regular expenses. However, as soon as interest income starts coming in, many senior citizens face an unexpected issue — Tax Deducted at Source (TDS) on FD interest.
The good news is that with updated rules and smart planning, senior citizens can legally avoid TDS on FD interest, even when the interest amount exceeds ₹1 lakh in a year. Understanding the latest government rules and using the right strategy can significantly reduce the tax burden and help retirees retain more of their hard-earned money.
The government has recently provided major relief to senior citizens by increasing the TDS exemption limit on FD interest. From 1 April 2025, the rule states that:
If a senior citizen earns up to ₹1,00,000 as interest from Fixed Deposits in a financial year from a single bank or post office, then no TDS will be deducted.
This rule applies uniformly to public sector banks, private banks, cooperative banks, and post offices.
Earlier, the TDS threshold was much lower, which resulted in frequent deductions even when the actual tax liability was zero. The revised limit offers significant relief, especially for retirees who depend heavily on interest income.
It is important to clearly understand that the ₹1 lakh TDS exemption applies only to interest earned from bank and post office deposits.
For interest income from other sources (such as corporate bonds or loans given to individuals), the TDS limit remains ₹10,000.
Therefore, senior citizens must distinguish between different types of interest income while planning their investments.
Proper classification of income helps in avoiding unnecessary tax deductions.
If the total interest earned from FDs in a single bank is ₹1,00,000 or less, the bank will not deduct TDS.
For example, if the FD interest rate is around 8%, an FD amount of approximately ₹12–13 lakh in one bank will generate close to ₹1 lakh interest annually — and no TDS will be deducted.
However, if the interest earned from that bank exceeds ₹1 lakh, the bank becomes eligible to deduct TDS, subject to applicable rules.
One of the most effective and legal ways to avoid TDS is by dividing FD investments across different banks.
For instance:
Interest from Bank A: ₹90,000
Interest from Bank B: ₹80,000
Even though the total interest income becomes ₹1,70,000, no TDS will be deducted, because each bank pays less than ₹1 lakh in interest. TDS is calculated bank-wise, not on the combined total.
This strategy allows senior citizens to earn higher interest income without facing immediate tax deductions.
Form 15H is a self-declaration form specifically meant for senior citizens. By submitting this form to the bank, the depositor declares that their total tax liability for the financial year is zero, and therefore, TDS should not be deducted.
However, Form 15H can be submitted only under certain conditions:
The senior citizen’s total taxable income must be below the basic exemption limit.
If tax is payable, submitting Form 15H will not stop TDS and may attract penalties.
Form 15H is extremely beneficial when:
FD interest exceeds ₹1 lakh, but
The total annual income remains within the tax-free limit.
Most banks now allow online submission of Form 15H, making the process simple and convenient. It is generally advisable to submit this form at the beginning of the financial year to prevent unnecessary deductions.
With the right approach, senior citizens can legally avoid TDS on FD interest exceeding ₹1 lakh. Key steps include:
Distributing FD investments across multiple banks
Monitoring interest income from each source
Submitting Form 15H when eligible
A little awareness and planning can go a long way in reducing tax-related stress. By understanding the rules and using these simple strategies, retirees can protect their interest income, ensure better cash flow, and enjoy a more secure and worry-free retirement.
