Received FD interest this year? Here's how to calculate your tax liability before filing ITR
Interest earned on fixed deposits is fully taxable and must be reported correctly while filing your income tax return, even if the bank has already deducted TDS. Here's a step-by-step guide to calculating your FD tax liability and claiming eligible deductions before filing your ITR.
- Jul 19, 2026,
- Updated Jul 19, 2026 9:10 AM IST
Fixed deposits (FDs) remain one of the most popular investment options among Indian savers, but the interest earned on them is fully taxable. As taxpayers prepare to file their income tax returns (ITRs), experts advise them to correctly calculate and report FD interest income to avoid under-reporting of income, tax demands or notices from the Income Tax Department.
Although banks deduct tax at source (TDS) on eligible FD interest payments, this does not mean the income is tax-free. The interest must still be disclosed in the income tax return and taxed according to the taxpayer's applicable income tax slab.
Step 1: Calculate your total FD interest
The first step is to determine the total interest earned from all fixed deposits during the financial year.
Taxpayers can verify this using multiple sources, including:
Bank statements or FD interest certificates. Form 26AS. Annual Information Statement (AIS). Taxpayer Information Statement (TIS).
Checking all these records helps ensure that no interest income is missed while filing the ITR.
MUST READ: TDS deducted from salary but missing in Form 26AS? What the law says about your tax liability
Step 2: Report it under the correct income head
After calculating the total interest, it should be added to the taxpayer's total income and reported under the head "Income from Other Sources" in the income tax return.
Even if the bank has already deducted TDS, the entire interest amount—not the net amount credited after TDS—must be disclosed in the return.
Step 3: Calculate tax based on your slab
Interest earned on fixed deposits is taxed at the taxpayer's applicable income tax slab rate under both the old and new tax regimes.
For example, if an individual falls in the 30% tax bracket, the FD interest will also be taxed at 30%, irrespective of the rate of TDS deducted by the bank.
| Taxable Income Slab | New Tax Regime | Old Tax Regime |
|---|---|---|
| Up to ₹3,00,000 | Nil | Nil |
| ₹3,00,001 – ₹4,00,000 | Nil | 5% |
| ₹4,00,001 – ₹5,00,000 | 5% | 5% |
| ₹5,00,001 – ₹7,50,000 | 5% | 20% |
| ₹7,50,001 – ₹8,00,000 | 5% | 20% |
| ₹8,00,001 – ₹10,00,000 | 10% | 20% |
| ₹10,00,001 – ₹12,00,000 | 10% | 30% |
| ₹12,00,001 – ₹16,00,000 | 15% | 30% |
| ₹16,00,001 – ₹20,00,000 | 20% | 30% |
| ₹20,00,001 – ₹24,00,000 | 25% | 30% |
| Above ₹24,00,000 | 30% | 30% |
Step 4: Adjust TDS against tax liability
Under Section 194A of the Income-tax Act, 1961, banks generally deduct 10% TDS on eligible FD interest once the prescribed threshold is crossed.
The TDS reflected in Form 26AS or AIS can be claimed as tax credit while filing the ITR.
If the taxpayer's slab rate is higher than 10%, additional tax may have to be paid. Conversely, if the final tax liability is lower than the TDS deducted, the taxpayer can claim a refund.
MUST READ: Unity Small Finance Bank hikes 501-day FD rate to 8%; senior citizens to earn up to 8.5%
Tax benefits available
Resident senior citizens opting for the old tax regime can claim a deduction of up to ₹50,000 under Section 80TTB on interest earned from savings accounts, fixed deposits and recurring deposits. However, the deduction cannot exceed the actual interest income.
Taxpayers opting for the old regime can also claim a deduction of up to ₹1.5 lakh under Section 80C for investments made in eligible five-year tax-saving fixed deposits, subject to the overall Section 80C limit.
Tax experts say taxpayers should reconcile their FD interest with AIS, TIS and Form 26AS before filing their returns. Accurate reporting not only ensures compliance but also helps claim the correct TDS credit, deductions and any refund that may be due.
MUST READ: Getting 7%+ on FDs? Compare them with PPF, SCSS, NSC at post office before you invest
Fixed deposits (FDs) remain one of the most popular investment options among Indian savers, but the interest earned on them is fully taxable. As taxpayers prepare to file their income tax returns (ITRs), experts advise them to correctly calculate and report FD interest income to avoid under-reporting of income, tax demands or notices from the Income Tax Department.
Although banks deduct tax at source (TDS) on eligible FD interest payments, this does not mean the income is tax-free. The interest must still be disclosed in the income tax return and taxed according to the taxpayer's applicable income tax slab.
Step 1: Calculate your total FD interest
The first step is to determine the total interest earned from all fixed deposits during the financial year.
Taxpayers can verify this using multiple sources, including:
Bank statements or FD interest certificates. Form 26AS. Annual Information Statement (AIS). Taxpayer Information Statement (TIS).
Checking all these records helps ensure that no interest income is missed while filing the ITR.
MUST READ: TDS deducted from salary but missing in Form 26AS? What the law says about your tax liability
Step 2: Report it under the correct income head
After calculating the total interest, it should be added to the taxpayer's total income and reported under the head "Income from Other Sources" in the income tax return.
Even if the bank has already deducted TDS, the entire interest amount—not the net amount credited after TDS—must be disclosed in the return.
Step 3: Calculate tax based on your slab
Interest earned on fixed deposits is taxed at the taxpayer's applicable income tax slab rate under both the old and new tax regimes.
For example, if an individual falls in the 30% tax bracket, the FD interest will also be taxed at 30%, irrespective of the rate of TDS deducted by the bank.
| Taxable Income Slab | New Tax Regime | Old Tax Regime |
|---|---|---|
| Up to ₹3,00,000 | Nil | Nil |
| ₹3,00,001 – ₹4,00,000 | Nil | 5% |
| ₹4,00,001 – ₹5,00,000 | 5% | 5% |
| ₹5,00,001 – ₹7,50,000 | 5% | 20% |
| ₹7,50,001 – ₹8,00,000 | 5% | 20% |
| ₹8,00,001 – ₹10,00,000 | 10% | 20% |
| ₹10,00,001 – ₹12,00,000 | 10% | 30% |
| ₹12,00,001 – ₹16,00,000 | 15% | 30% |
| ₹16,00,001 – ₹20,00,000 | 20% | 30% |
| ₹20,00,001 – ₹24,00,000 | 25% | 30% |
| Above ₹24,00,000 | 30% | 30% |
Step 4: Adjust TDS against tax liability
Under Section 194A of the Income-tax Act, 1961, banks generally deduct 10% TDS on eligible FD interest once the prescribed threshold is crossed.
The TDS reflected in Form 26AS or AIS can be claimed as tax credit while filing the ITR.
If the taxpayer's slab rate is higher than 10%, additional tax may have to be paid. Conversely, if the final tax liability is lower than the TDS deducted, the taxpayer can claim a refund.
MUST READ: Unity Small Finance Bank hikes 501-day FD rate to 8%; senior citizens to earn up to 8.5%
Tax benefits available
Resident senior citizens opting for the old tax regime can claim a deduction of up to ₹50,000 under Section 80TTB on interest earned from savings accounts, fixed deposits and recurring deposits. However, the deduction cannot exceed the actual interest income.
Taxpayers opting for the old regime can also claim a deduction of up to ₹1.5 lakh under Section 80C for investments made in eligible five-year tax-saving fixed deposits, subject to the overall Section 80C limit.
Tax experts say taxpayers should reconcile their FD interest with AIS, TIS and Form 26AS before filing their returns. Accurate reporting not only ensures compliance but also helps claim the correct TDS credit, deductions and any refund that may be due.
MUST READ: Getting 7%+ on FDs? Compare them with PPF, SCSS, NSC at post office before you invest