Is FD interest taxable? Let’s understand the tax implications

Key Takeaways

Interest earned on a fixed deposit is fully taxable and must be added to your total income for the year.
Banks deduct TDS at 10 % if interest in a financial year exceeds ₹40,000 or ₹50,000 for senior citizens, but your actual tax payable depends on your income slab.
Some FD types, like NRE FDs for NRIs, may offer tax-exempt interest under Indian law while others still attract tax.
IDFC FIRST Bank offers fixed deposits with competitive interest rates; even with tax implications, the option remains a strong choice for risk-free returns.

11 Nov 2025 by Team FinFIRST

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Are you looking to grow your savings through fixed deposits (FDs) in India but need clarification on the tax implications?

Tax is often seen as a sore point. But you can plan for it in advance with a proper understanding of how it is calculated on your investments.

In this article, we'll help you answer questions such as 'is FD interest taxable?', 'how much tax do you owe on your FD?', 'how is tax calculated on your FD?', and so on.

Types of FDs in India and their taxability

Standard fixed deposit

A standard FD is a basic term deposit with a fixed interest and term. It offers higher interest rates than savings accounts and can offer tenures of up to 10 years. Standard FD interest is taxable as ordinary income tax. It is added to your gross income and taxed according to the applicable tax slab.

Additionally, the bank implements TDS (tax deducted at source) when the interest is credited to your account. TDS on interest income is charged at 10% on amounts exceeding Rs 40,000. If you do not provide your PAN information to the bank, the TDS rate is increased to 20% for amounts exceeding Rs 40,000.

Benefits of tax saving FD under 80C section of Income Tax Act

Why do senior citizens need Tax Saving Fixed Deposit?

Tax-saving fixed deposit

As the name suggests, a tax-saving FD helps you save tax. This is the only type of FD that qualifies for a tax deduction under Section 80C of the Income Tax Act of 1961. The amount can be up to Rs 1.5 lakh p. a. However, such an FD has a lock-in period of 5 years.

While you can claim a tax deduction under Section 80C, you will still be taxed on the fixed deposit's interest income as per the applicable tax slab. The bank will also deduct TDS, as explained above.
Fixed deposit for senior citizens

Senior citizen FDs can be opened by people over the age of 60. These FDs offer relatively higher interest rates. However, the rest of the features remain the same as a standard FD.

The fixed deposit's interest income is taxed as per the applicable tax slabs, and the bank cuts a 10% TDS on interest income exceeding Rs 50,000 and 20% in the absence of PAN information.

Non-Resident Indian (NRI) fixed deposit

NRIs can open two types of FDs – Non-Resident External (NRE) FD and Non-Resident Ordinary (NRO) FD. An NRE FD can be opened with funds earned abroad and remitted into an Indian FD account. An NRO FD can be used to manage revenue earned in India.

An NRE FD is exempt from taxes in India. On the other hand, NRO FD interest is taxable, and TDS along with applicable cess and surcharge is calculated.

How is FD interest taxable? Some case studies

Ms X, aged 30, invests Rs 1 lakh in a standard FD and earns an interest of Rs 8,000 in a financial year. As the interest earned is less than Rs 40,000, there is no TDS deducted. However, the interest earned is added to their income and taxed as per their income tax slab rate. They fall under the income range of Rs 9,00,000 to Rs 12,00,000, with their cumulative income including the FD interest. Hence, they will pay Rs 45,000 + 15% on income over Rs 9,00,000 because standard FD interest is taxable.

Mr Y, aged 65, invests in an FD for senior citizens and earns an interest of Rs 55,000 in a financial year. As the interest earned is more than Rs 50,000, and Mr Y shared their PAN, the bank deducts TDS at 10% as FD interest is taxable for senior citizens too.

Also read: https://www.idfcfirst.bank.in/finfirst-blogs/finance/things-to-know-before-you-open-an-fd

Conclusion

The answer to the question, 'is FD interest taxable?' is a straight yes. However, the way FDs are taxed can differ based on the type. Now that you know the details, you can invest in IDFC FIRST Bank Fixed Deposits that offer interest rates as high as 7.50% p.a. (subject to change from time to time), and for tenures ranging from 7 days to 10 years.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.