Whalesbook
Legal Wording Changes Cause Confusion
Fixed and recurring deposit holders had expressed concern about potential tax increases under the new Income-tax Act, 2025. This worry arose from changes to legal sections and definitions, including the move of TDS on interest from Section 194A of the 1961 Act to Section 393(1) of the new law, and banking company definitions under Section 402.
TDS Rates and Thresholds Remain the Same
The Income Tax Department confirmed that these legal adjustments do not alter the tax treatment or rates for depositors. Banks will continue to deduct TDS at the existing 10% rate on interest exceeding the prescribed thresholds. If a Permanent Account Number (PAN) is not provided, the TDS rate will remain 20%.
The threshold for TDS deduction is Rs 50,000 for individuals and Rs 1 lakh for senior citizens annually. No TDS applies to savings account interest, though it remains taxable above Rs 10,000 under Section 80TTA. Taxpayers with income below the taxable limit can still avoid TDS by submitting Form 15G (for individuals under 60) or Form 15H (for senior citizens aged 60+) to their banks.
Certainty for Savers
This clarification provides certainty for millions of bank customers who feared unexpected increases in their tax liabilities. The department's assurance confirms that the practical aspects of TDS on term deposits are unchanged by the recent legislative updates.