Key Changes in TDS for Fixed Deposit Interest

In the Income Tax Budget 2025, Finance Minister Nirmala Sitharaman has introduced a favorable change for depositors. The TDS exemption limit on interest earned from bank fixed deposits (FDs) has been raised, benefiting individuals below 60 years of age.

Previously, no TDS was deducted on interest earnings up to Rs 40,000 from bank FDs. Now, this limit has been increased to Rs 50,000. This means that individuals earning interest below this threshold will not face automatic TDS deductions from their banks.

For amounts exceeding Rs 50,000:

• If the depositor’s PAN is registered with the bank, a 10% TDS will be deducted.

• If PAN details are missing, the TDS rate rises to 20%.

The new TDS limit will be effective from April 1, 2025. However, different exemptions apply to senior citizens, and banks announce these separately.

This move aligns with the government’s broader strategy of enhancing liquidity in the hands of consumers. By reducing tax deductions at the source, the government aims to boost disposable income and drive economic consumption.

This measure is expected to provide significant relief to middle-class depositors while encouraging higher savings.