Section 194A – TDS on Interest Income: FD, Loans, Thresholds & Exemptions (FY 2025–26 Guide)
Interest income is one of the most common sources of taxable income for individuals, senior citizens, businesses, and NRIs.Section 194A of the Income Tax Act governs Tax Deducted at Source (TDS) on interest income, excluding interest on securities. M...
Interest income is one of the most common sources of taxable income for individuals, senior citizens, businesses, and NRIs.
Section 194A of the Income Tax Act governs Tax Deducted at Source (TDS) on interest income, excluding interest on securities.
Many taxpayers face:
Unexpected TDS on FD interest
Confusion around thresholds
Improper use of Form 15G / 15H
Mismatch between Form 26AS, AIS & ITR
This WonderTax guide explains Section 194A in detail, with practical examples and compliance tips.
What Is Section 194A?
Section 194A requires deduction of TDS on interest (other than interest on securities) paid by specified persons.
Common Types of Interest Covered:
Fixed Deposit (FD) interest
Recurring Deposit (RD) interest
Interest on loans
Interest on advances
Interest on debentures (non-listed)
Who Is Required to Deduct TDS Under Section 194A?
| Deductor | TDS Applicable? |
| Banks (public & private) | Yes |
| Co-operative banks | Yes |
| NBFCs | Yes |
| Companies | Yes |
| Partnership firms | Yes |
| Individuals/HUF (business/profession) | Yes (if liable to tax audit) |
⚠️ Individuals & HUFs not liable to tax audit are generally exempt from deducting TDS under Section 194A.
Threshold Limit for TDS Under Section 194A (FY 2025–26)
| Category | TDS Applicable If Interest Exceeds |
| Senior Citizens (Banks/Post Office) | ₹50,000 |
| Others (Banks) | ₹40,000 |
| Other deductors (NBFCs, companies) | ₹5,000 |
👉 Threshold is per deductor, per financial year.
TDS Rate Under Section 194A
| Situation | TDS Rate |
| PAN provided | 10% |
| PAN not provided | 20% |
| Valid Form 15G / 15H | NIL |
Example 1: TDS on FD Interest (Non-Senior Citizen)
FD Interest from Bank: ₹45,000
Threshold: ₹40,000
TDS Calculation:
- TDS @10% on ₹45,000 = ₹4,500
Bank will credit:
₹40,500 to your account
₹4,500 deposited as TDS
Example 2: Senior Citizen FD Interest
FD Interest: ₹48,000
Threshold for senior citizens: ₹50,000
👉 No TDS deducted, but interest is still taxable and must be reported in ITR.
Example 3: Interest on Loan Given
Interest received from private loan: ₹60,000
Deductor: Company
👉 TDS @10% = ₹6,000
👉 Net interest received = ₹54,000
Form 15G & Form 15H – Avoiding Excess TDS
Form 15G
For individuals below 60 years
Total income below basic exemption limit
Form 15H
For senior citizens (60+)
Even if income exceeds exemption, allowed if tax payable is NIL
⚠️ Wrong submission may attract penalty for false declaration.
When Is TDS Deducted?
At the time of credit or payment, whichever is earlier
Banks usually deduct TDS quarterly or annually
How to Check TDS Deducted on Interest?
Form 26AS
AIS (Annual Information Statement)
Bank/NBFC interest certificate
👉 Always reconcile before filing ITR to avoid notices.
Common Mistakes Under Section 194A
Assuming no TDS = no tax liability
Forgetting to report interest below threshold
Submitting Form 15G/15H despite taxable income
Missing interest from multiple banks
PAN not updated with bank → higher TDS
Tax Planning Tips for Interest Income
✔ Spread deposits across banks to manage thresholds
✔ Senior citizens should use Section 80TTB (₹50,000 deduction)
✔ Use tax-efficient instruments (PPF, SCSS)
✔ Always report gross interest, not net received
FAQs (Schema-Ready)
Is interest income taxable even if no TDS is deducted?
Yes. TDS and tax liability are separate concepts.
Can I claim refund of excess TDS?
Yes, while filing ITR.
Does Section 194A apply to savings bank interest?
No. Savings interest is exempt from TDS but taxable.
Is RD interest also covered?
Yes. RD interest is treated like FD interest.
Internal Links (WonderTax)
Income Tax Filing for Individuals
https://wondertax.in/income-tax-filingSenior Citizen Tax Planning Guide
https://wondertax.in/senior-citizen-tax-planningAIS & TDS Reconciliation Guide
https://wondertax.in/ais-tis-guide
Conclusion
Section 194A impacts almost every taxpayer earning interest income.
Understanding thresholds, exemptions, and reporting rules helps avoid:
Excess TDS
Refund delays
Income tax notices
Correct reporting is as important as correct deduction.
CTA – WonderTax
👉 Confused about interest income, TDS mismatch or refunds?
WonderTax helps with:
Interest income reconciliation
Excess TDS refunds
ITR filing & compliance
Notice handling
