The Union Budget 2025 has increased the tax deduction at source (TDS) threshold on fixed deposit (FD) interest, offering significant relief to depositors. The limit for non-senior citizens has been raised from ₹40,000 to ₹50,000 per financial year, while for senior citizens, it has been doubled from ₹50,000 to ₹1 lakh starting FY26.M Nagaraju, Secretary of the Department of Financial Services, said the move is expected to bring an additional ₹42,000-₹45,000 crore in bank deposits.“We expect at least ₹15,000 crore in fresh deposits from senior citizens and ₹7,000 crore from non-senior citizens. Additionally, around ₹20,000 crore could return to banks with the tax exemption limit raised to ₹12 lakh,” he said.
Also read: Budget 2025: How income up to ₹12 lakh is tax-free under new tax regime | ExplainedSenior citizen deposits form a substantial portion of the banking system’s total deposits, and TDS has been a deterrent for many to park funds in banks. The new threshold is expected to improve banking liquidity and reduce reliance on high-cost borrowings.Currently, non-senior citizens get a ₹10,000 tax exemption on interest income, while senior citizens enjoy a ₹50,000 exemption. The revised TDS limits mean banks will not deduct tax until a depositor’s interest income crosses ₹50,000 for non-seniors and ₹1 lakh for seniors(Edited by : Ajay Vaishnav)
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