Section 194A TDS: Complete Guide to TDS on Interest Income (2025 Update)
TDS Rates | Exemptions | Refund Process | Compliance Tips
CA Rishabh Mehta 10 min read
If you have a Fixed Deposit (FD), savings account, or earn any interest income, you might have noticed that a small portion of your money is sometimes deducted by the bank before crediting the interest. This deduction is called TDS (Tax Deducted at Source).
One of the most important provisions in the Income Tax Act for such deductions is Section 194A.
But here's the problem 👉 Most taxpayers are confused about when TDS is applicable, what the limits are, and how to avoid unnecessary deductions. At Taxiteazy, we regularly handle cases where clients either lost money due to lack of awareness or delayed in claiming refunds.
This blog is your one-stop guide to Section 194A — no need to check anywhere else!
Section 194A of the Income Tax Act deals with TDS on interest income other than "interest on securities".
Key Points:
Who deducts TDS? – Banks, post offices, co-operative societies, and other financial institutions.
Who pays TDS? – Any person earning interest (except certain exemptions like senior citizens below threshold).
Rate of deduction? – Generally 10% if PAN is provided, otherwise 20%.
Threshold limit? – ₹40,000 for individuals, ₹50,000 for senior citizens (from AY 2020–21).
In short: If your FD or savings interest crosses the limit, the bank will deduct 10% TDS automatically.
📍 What is the Limit of Section 194A for Banks?
For individuals (below 60 years) → ₹40,000
For senior citizens (60+ years) → ₹50,000
This limit applies per bank, per branch.
✅ Example:
If you have an FD in Bank A (₹30,000 interest) and Bank B (₹35,000 interest) → No TDS.
But if in Bank A itself you earn ₹45,000 interest → Bank A must deduct TDS.
At Taxiteazy, we often see clients with multiple FDs in different banks where TDS wasn't deducted in one bank but was deducted in another. They later struggle during ITR filing — that's why planning is crucial.
📍 Difference Between Section 194 and Section 194A
Section
Applies To
Nature of Payment
TDS Rate
194
Dividends
Dividend from companies
10%
194A
Interest (other than securities)
FD interest, savings account interest, etc.
10%
So, 194 = Dividend, 194A = Interest.
📍 What is 194A in TRACES?
TRACES (TDS Reconciliation Analysis and Correction Enabling System) is the Income Tax portal where TDS details are available.
When banks deduct TDS under 194A, it gets reflected in your Form 26AS and AIS.
You can log in to TRACES to view and download your TDS certificate (Form 16A).
📍 How Much FD Interest is Tax-Free?
Many people believe FD interest is "tax-free" up to ₹10,000 or ₹50,000. That's not true.
Savings account interest up to ₹10,000 is exempt under Section 80TTA.
FD interest is fully taxable — but TDS is deducted only above ₹40,000 / ₹50,000.
👉 Even if no TDS is deducted, you must report all FD interest in your ITR.
📍 When Was Section 194A Introduced?
Section 194A was introduced in the Finance Act, 1967, to widen the tax base by ensuring interest incomes are reported.
Over the years, the threshold limits increased:
₹5,000 → ₹10,000 → ₹40,000 (for individuals)
Special limit of ₹50,000 for senior citizens (since 2018).
📍 Which ITR is Applicable for 194A?
ITR-1 (Sahaj) → If you are a salaried person with FD interest.
ITR-2 → If you have multiple income sources (capital gains, house property, etc.).
ITR-3 → If you have business/professional income along with interest.
At Taxiteazy, we recommend ITR-2 if your income is slightly complex, to avoid future notices.
📍 What is the Maximum Interest to Avoid TDS?
₹40,000 for regular taxpayers
₹50,000 for senior citizens
👉 To avoid TDS, you can submit Form 15G (for individuals below taxable limit) or Form 15H (for senior citizens) to your bank.
How to Avoid Tax on Savings Account Interest?
Savings interest up to ₹10,000 is exempt under 80TTA.
Senior citizens get ₹50,000 exemption under 80TTB (including savings + FD).
👉 Example:
At Taxiteazy, we helped a retired client earning ₹45,000 savings + FD interest. He claimed exemption under 80TTB and paid zero tax.
📍 Is TDS Deducted on FD Interest Refundable?
Yes ✅
If your total income is below the taxable limit, you can claim a refund while filing ITR.
Example:
A student earning ₹30,000 FD interest got TDS deducted. During ITR, he claimed a 100% refund.
📍 How to Calculate TDS Late Payment Interest?
If you delay depositing TDS:
1.5% per month (or part of month) on amount not deposited.
Example:
If TDS of ₹5,000 was due on 7th May but paid on 25th June → Interest = 1.5% × 2 months × 5000 = ₹150.
📍 Who is Eligible Under Section 194A?
All individuals earning interest income other than securities.
Exceptions:
Income paid to government, LIC, insurance companies, etc.
📍 Is TDS 194A Refundable?
Yes — through ITR. If excess TDS deducted, claim refund.
📍 How to Pay 194A TDS Online?
Visit TIN-NSDL website
Select Challan 281.
Enter TAN, assessment year, nature of payment (194A).
Pay via net banking/NEFT.
Download challan & file TDS return.
📍 How Much Tax on 20 Lakh FD in India?
Assume 7% FD interest → ₹1.4 lakh yearly.
Tax depends on your slab:
5% slab → ₹7,000 tax
20% slab → ₹28,000 tax
30% slab → ₹42,000 tax
📍 How Much FD is Safe in Bank?
As per DICGC insurance, deposits up to ₹5 lakh per bank per person are insured.
📍 Is FD Interest Taxable for a Housewife?
Yes ✅. FD interest is taxable in the housewife's name.
But if FD is funded by husband, income may be clubbed with husband's income under clubbing provisions.
📍 What is 194A in AIS?
AIS (Annual Information Statement) now reflects all interest incomes under 194A.
👉 Always cross-check your AIS with bank passbook before filing ITR.
📍 What is 194A(3) of Income Tax Act?
Section 194A(3) lists exemptions, like:
Interest paid to LIC, UTI, insurers
Interest on NRE accounts
Interest below threshold
📍 Is TDS Deducted on Saving Bank Interest?
No ❌. TDS is not deducted on savings account interest. But it is still taxable if above ₹10,000 (80TTA exemption).
📍 What is the New TDS Rule for 2025?
Still 10% deduction rate.
No major amendment in Budget 2025 yet.
📍 How Many Times Can TDS Return Be Corrected?
Unlimited ✅. You can file correction statements in TRACES.
📍 How Much Tax Do I Pay on ₹8,00,000 Salary in India?
(New Regime FY 2025-26)
Up to 3 lakh → Nil
3–7 lakh → 5% = ₹20,000
7–10 lakh → 10% = ₹10,000
Total tax = ₹30,000 (plus cess).
📍 How to Calculate Delayed Interest?
Use formula:
Interest = Principal × Rate × Time
Example:
₹1,00,000 FD at 7% for 6 months = ₹3,500.
How to Calculate Interest Rate?
Reverse formula:
Rate = (Interest ÷ Principal × 100) ÷ Time
❓ Frequently Asked Questions (FAQs)
The TDS rate is 10% if PAN is provided. If PAN is not provided, the rate increases to 20%.
No, TDS is not applicable on savings account interest. However, interest above ₹10,000 is taxable and must be reported in your ITR, though no TDS is deducted at source.
Senior citizens can submit Form 15H to their bank if their total income is below the taxable limit. This form declares that their tax liability is nil, preventing TDS deduction on interest income.
If TDS has been deducted but your total income is below the taxable limit, you can claim a full refund of the TDS amount by filing your Income Tax Return (ITR).
The limit is per bank, per branch. This means each bank will apply TDS only if the interest from that particular bank exceeds the threshold limit, regardless of interest earned from other banks.
Yes, since the TDS threshold applies per bank, splitting your FDs across different banks can help avoid TDS if the interest from each bank remains below the threshold limit. However, remember that you still need to report all interest income in your ITR.
TDS deducted under Section 194A must be deposited to the government by the 7th of the following month. For March deductions, the due date is April 30th.
✅ Conclusion
Section 194A is crucial for anyone with interest income.
Threshold: ₹40,000 / ₹50,000
Rate: 10% (20% without PAN)
Refund possible via ITR
Always cross-check Form 26AS & AIS
👉 At Taxiteazy, we specialize in TDS compliance, refund claims, and tax planning. If you're confused about FD interest, deductions, or refunds, we're here to help.
