For resident senior citizens, the Tax Deducted at Source (TDS) threshold on interest paid by banks is currently ₹1 lakh during a financial year. According to reports from The Economic Times, if the total eligible interest paid or credited by a bank to a resident senior citizen does not exceed ₹1 lakh during the year, TDS is generally not required. However, once the interest crosses ₹1 lakh, the bank can deduct TDS on the entire amount, not just the portion above the threshold. The normal TDS rate on such interest for a resident is 10 per cent. Recent developments show that senior citizens typically receive a higher TDS threshold of ₹50,000 compared to the standard ₹40,000 threshold, though these figures are periodically revised and may vary by bank. At Central Bank of India, specifically, TDS is deducted when interest exceeds ₹50,000 p.a. for regular depositors and ₹1,00,000 p.a. for senior citizens (w.e.f. 01.04.2025), unless a valid Form 15G/15H is submitted. Bandhan Bank also confirms that senior citizens receive a ₹1 lakh TDS threshold and requires PAN details for FD investments.
For investments below ₹1 lakh, TDS is not applicable regardless of the interest rate. As reported by The Economic Times, if a senior citizen invests ₹5 lakh at 7% interest, the annual interest remains at ₹35,000, well below the TDS threshold. Similarly, a ₹10 lakh investment at 7% interest generates ₹70,000 annually, also staying below the ₹1 lakh limit. However, the bank may consider interest from other eligible deposits held by the same customer when determining whether the TDS threshold is crossed. Recent guidance confirms that eligible taxpayers can submit Form 15G (Form 15H if you're a senior citizen) to your bank at the start of the financial year, which instructs the bank not to deduct TDS on your FD interest, though eligibility depends on your total taxable income and other conditions.
When investments reach ₹15 lakh, TDS becomes applicable even at lower interest rates. According to the analysis, at 7% interest, a ₹15 lakh FD generates ₹1,05,000 annual interest, crossing the TDS threshold. TDS at 10% would amount to ₹10,500. Similarly, at 7.5% interest, the annual interest reaches ₹1,12,500, resulting in TDS of ₹11,250. At 8% interest, the annual interest is ₹1,20,000, triggering TDS of ₹12,000. Recent market data shows that senior citizens typically receive an additional 0.25%–0.75% p.a. over the standard card rate on the same tenure, along with the higher TDS threshold, making their effective returns more competitive. Bandhan Bank also notes that interest earned on a Fixed Deposit is taxable under applicable income-tax rules, regardless of whether you invest with Bandhan Bank or any other bank, with TDS potentially deducted when interest income crosses the applicable threshold.
Opening several FDs at different branches of the same bank usually does not provide separate ₹1 lakh limits for each branch. As reported by The Economic Times, where a bank uses Core Banking Solutions, the threshold is generally calculated with reference to the total interest credited or paid by the bank rather than separately for individual branches. Therefore, senior citizens should consider their total interest from deposits with the same bank when checking whether the TDS limit may be crossed. Recent analysis confirms that deposits (including FDs) with a bank in India are insured by DICGC, covering both principal and interest, up to a limit of ₹5 lakh per depositor per bank, with any amount above the insured limit not covered by DICGC.
