Big FD Portfolio? 3 Tax Rules Draining Your Returns

Fixed deposits are popular in India, but many people don't realise how much tax they quietly pay on FD interest. Here's how FD taxation works, what TDS means for you, and how to legally reduce your tax burden on large FD portfolios.

Here's what happened: FD interest in India is fully taxable as 'Income from Other Sources' at the investor's applicable income tax slab rate, with no flat concessional rate.. Banks are required to deduct TDS at 10% once your total FD interest from that bank exceeds ₹40,000 per year (₹50,000 for senior citizens) under Section 194A.. Large FD portfolios — running into several crores — can generate interest income in lakhs annually, pushing the investor into the highest 30% tax bracket on that income..

What you should do: Check your Form 26AS on the Income Tax portal to verify how much TDS has already been deducted from your FD interest this financial year.. Submit Form 15G (or Form 15H if you are a senior citizen) to your bank at the start of each April if your total income is below the taxable threshold — this prevents unnecessary TDS deduction.. Consider splitting large lump-sum FD investments between your name and a spouse or parent (with their own income sources) to avoid all interest being taxed at a single high slab rate..

Interest from tax-saving FDs (5-year lock-in under Section 80C) qualifies for a deduction up to ₹1.5 lakh — but the interest earned on them is still fully taxable. Many investors miss this and get a surprise tax bill.