FD & KVP Tax Rules: Are You Paying the Right Amount?
Interest earned on fixed deposits and Kisan Vikas Patra is fully taxable. Banks deduct TDS if interest exceeds ₹40,000 a year. But many savers don't declare the full amount in their ITR — and that's a costly mistake.
A ₹5 lakh FD at 7% earns ₹35,000/year — just ₹5,000 short of TDS trigger. One rate hike and your bank starts cutting tax.
Your FD interest above this crosses TDS trigger — many savers miss this
Key Takeaways
Log into the income tax portal and check your Annual Information Statement (AIS) to see all interest income the tax department already knows about — match it with your own records before filing.
Submit Form 15G or 15H at the beginning of every financial year to your bank if your total income falls below the taxable threshold — this prevents unnecessary TDS deduction.
Declare KVP interest in your ITR every year under 'Income from Other Sources' even if no TDS was deducted — use the interest accrual table printed on your KVP certificate.
Interest earned on fixed deposits and Kisan Vikas Patra is fully taxable. Banks deduct TDS if interest exceeds ₹40,000 a year. But many savers don't declare the full amount in their ITR — and that's a costly mistake.
Here's what happened: Under the Income Tax Act, interest from FDs and KVP is fully taxable as 'Income from Other Sources' in the year it is earned, not just when withdrawn.. Banks are required to deduct TDS at 10% on FD interest exceeding ₹40,000 per year per bank (₹50,000 for senior citizens aged 60 and above).. KVP interest accrues on a compound basis and must be reported annually in your ITR — deferring declaration until maturity can attract notices and interest penalties from the IT department..
What you should do: Log into the income tax portal and check your Annual Information Statement (AIS) to see all interest income the tax department already knows about — match it with your own records before filing.. Submit Form 15G or 15H at the beginning of every financial year to your bank if your total income falls below the taxable threshold — this prevents unnecessary TDS deduction.. Declare KVP interest in your ITR every year under 'Income from Other Sources' even if no TDS was deducted — use the interest accrual table printed on your KVP certificate..
Split FDs across family members (spouse, parents) in their names — each individual gets a separate ₹40,000 TDS threshold, legally reducing the household's overall TDS burden.
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- [1]“FD and KVP tax rules explained: TDS, taxable interest and key differences” mint - money · 7 Aug 2026
This article is reported by GoCredit's Editorial Team based on the source above. GoCredit synthesises, contextualises, and adds India-borrower-relevant analysis. We are not the original publisher.