How FD interest works
Most banks compound fixed deposit interest every quarter, so the effective yield is slightly higher than the quoted rate (7% quarterly ≈ 7.19% a year). Senior citizens usually get 0.25–0.50% extra.
TDS and income tax
Banks deduct 10% TDS when your interest from that bank exceeds ₹50,000 in a financial year (₹1 lakh for senior citizens). TDS is not the final tax: interest is added to your income and taxed at your slab rate, so you may owe more or claim a refund. Submit Form 15G (or 15H if 60+) if your income is below the taxable limit.
FAQ
How is FD interest calculated?
Maturity = P × (1 + r/4)^(4 × years) for quarterly compounding. A ₹5 lakh FD at 7% for 3 years matures at about ₹6.16 lakh.
What is the TDS limit on FD interest for FY 2026-27?
₹50,000 a year per bank for most depositors and ₹1 lakh for senior citizens.
Is FD interest taxable in the new regime?
Yes. It is taxed at your slab rate in both regimes; only senior citizens in the old regime can claim up to ₹50,000 under section 80TTB.