- Non-senior citizens face TDS on interest income exceeding ₹50,000 annually per bank institution.
- Senior citizens benefit from a higher ₹1,00,000 threshold before tax is deducted at source.
- Missing PAN details doubles the tax rate from 10% to 20% on the entire interest amount.
(INDIA) — The most important difference under Section 194A is simple: a bank starts deducting TDS on deposit interest much sooner for people under 60 than for senior citizens.
For financial year 2025-26 and current as of March 31, 2026, banks must deduct tax at source on interest from fixed deposits, recurring deposits, and similar deposits once the annual threshold is crossed. For non-senior citizens, that threshold is ₹50,000 per financial year. For senior citizens aged 60 or above, it is ₹1,00,000 per financial year.
This matters because many depositors assume TDS applies only to the amount above the limit. That is not how the rule works. Once your total qualifying interest with the same bank, post office, or eligible cooperative society crosses the threshold, TDS is deducted on the entire interest amount, not only the excess.
Senior citizens vs non-senior citizens: the core comparison
Here is the side-by-side rule readers need to know for FY 2025-26.
| Category | Age | TDS Threshold | TDS Rate with PAN | TDS Rate without PAN |
|---|---|---|---|---|
| Non-senior citizen | Below 60 | ₹50,000 | 10% | 20% |
| Senior citizen | 60 or above | ₹1,00,000 | 10% | 20% |
The threshold increase for non-seniors is the key shift many depositors noticed after earlier lower limits. The higher senior citizen threshold remains a major benefit for retirees who depend on interest income.
If you do not submit your PAN to the bank, the TDS rate can double from 10% to 20%.
What counts for TDS under Section 194A
Section 194A applies to interest from:
- Fixed deposits
- Recurring deposits
- Similar interest-bearing deposit products
The rule is based on aggregate interest with the same institution in a financial year.
That means the bank adds up interest from all your deposits with it. It does not look at each FD separately.
Example 1: Non-senior citizen
Rohan, age 35, holds three FDs with the same bank.
- FD 1 interest: ₹18,000
- FD 2 interest: ₹16,000
- FD 3 interest: ₹19,000
Total annual interest = ₹53,000
Since the total exceeds ₹50,000, the bank can deduct TDS on the entire ₹53,000, not only on ₹3,000.
If PAN is on file, TDS is 10%, or ₹5,300.
If PAN is not on file, TDS is 20%, or ₹10,600.
Example 2: Senior citizen
Meera, age 67, earns:
- FD interest with Bank A: ₹72,000
- RD interest with Bank A: ₹31,000
Total annual interest with Bank A = ₹1,03,000
This exceeds the ₹1,00,000 threshold for seniors.
With PAN, TDS is 10% of ₹1,03,000 = ₹10,300.
Without PAN, TDS is 20% of ₹1,03,000 = ₹20,600.
When does the bank deduct TDS?
The timing rule is often missed.
TDS is deducted at the time of:
- Credit to your account, or
- Actual payment
The bank applies whichever happens earlier.
So even if you have not withdrawn the interest, TDS can still be deducted when the interest is credited.
This is one reason depositors should review projected annual interest before the financial year closes.
If you plan to submit Form 15G or Form 15H, do it before the bank credits interest for the year. Late submission may not stop TDS already deducted.
What does not attract TDS?
Not every kind of interest triggers TDS under this rule.
Generally, no TDS applies to:
- Savings account interest
- Interest that stays below the threshold
- Tax-free bonds
This does not mean the income is always tax-free. It only means the payer does not deduct tax at source in those cases.
That distinction matters. TDS is a collection mechanism. Your final tax bill still depends on your total income and slab rate.
How to avoid TDS legally
If your total income is below the taxable limit, you may be able to stop TDS by filing a declaration.
Use:
- Form 15G if you are under 60
- Form 15H if you are a senior citizen
These forms tell the bank that your total tax liability should be nil, subject to eligibility conditions.
This is not automatic. You must submit the correct form to the bank or deposit institution.
Quick comparison of compliance forms
| Form | Who can use it | Basic purpose |
|---|---|---|
| Form 15G | Individuals below 60, subject to conditions | Request no TDS when total income is below taxable limit |
| Form 15H | Senior citizens, subject to conditions | Request no TDS when tax liability is nil |
| Form 16A | Issued by bank | TDS certificate used to claim credit in your return |
Banks issue Form 16A when they deduct tax. Keep it safely. You will need it while filing your income tax return and matching TDS credit.
TDS deducted does not settle your final tax
This is the second major point readers should remember.
Interest income remains fully taxable at your slab rate, even if TDS was already deducted.
That creates two common situations:
1. TDS is lower than your actual tax
Suppose a depositor falls in a 30% slab and the bank deducts 10% TDS on FD interest.
The depositor may still owe extra tax when filing the return.
2. TDS is higher than your actual tax
Suppose a depositor has low total income and tax was deducted at 10% or 20%.
That person may claim the excess as a refund through the income tax return.
Example 3: Refund case
Anil, age 45, earns FD interest of ₹60,000. The bank deducts ₹6,000 as TDS at 10%.
But after deductions, his final tax liability on total income is only ₹2,000.
He can claim a refund of ₹4,000 in his return, subject to return processing.
Check your annual interest projection in the third quarter. That gives you time to submit PAN or the right declaration form.
Common mistakes that lead to avoidable TDS problems
Many TDS disputes come from simple errors.
1. Looking at each FD instead of total interest
A bank usually totals all qualifying interest within the same institution.
Avoid it: Add interest from every FD and RD with that bank.
2. Forgetting to update PAN
No PAN can mean 20% TDS.
Avoid it: Confirm PAN is linked to your deposit account.
3. Assuming no TDS means no tax
Even if no tax is deducted, the interest may still be taxable.
Avoid it: Report interest income correctly in your return.
4. Filing Form 15G or 15H without checking eligibility
These forms are not for everyone.
Avoid it: Use them only if your income and tax position allow it.
5. Ignoring Form 16A
Without checking Form 16A, some taxpayers miss TDS credit.
Avoid it: Match the certificate with your tax records before filing.
At-a-glance snapshot for FY 2025-26
| Item | Non-senior citizen | Senior citizen |
|---|---|---|
| Threshold | ₹50,000 | ₹1,00,000 |
| TDS with PAN | 10% | 10% |
| TDS without PAN | 20% | 20% |
| Form to request no TDS, if eligible | Form 15G | Form 15H |
| TDS certificate from bank | Form 16A | Form 16A |
What to watch for in 2026
For readers preparing for the next filing cycle, one point is worth noting. The thresholds discussed here apply for FY 2025-26, ending on March 31, 2026. The material tied to the 2025 Act, effective April 1, 2026, indicates these thresholds remain unchanged.
So, as things stand on March 31, 2026, depositors should still work with:
- ₹50,000 for non-senior citizens
- ₹1,00,000 for senior citizens
- 10% TDS with PAN
- 20% TDS without PAN
Review your bank records before the year closes. Confirm your PAN status. If you are eligible, submit Form 15G or Form 15H in time. If tax was already deducted, collect Form 16A and claim the right credit or refund in your return.
You are a non-senior depositor if you are below 60 and your bank starts applying Section 194A once aggregate annual interest crosses ₹50,000.
You are a senior depositor if you are 60 or older and the higher ₹1,00,000 threshold applies before TDS starts.
This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.
