What are the TDS provisions?
As per the Income Tax Act, 2025, TDS applies when the interest income payable by the bank exceeds a specified threshold. The threshold is interest payable exceeding ₹1 lakh for senior citizens and ₹50,000 for other individuals in a financial year.
For a bank customer, it includes interest on fixed deposits and recurring deposits across all branches of the bank. The bank deducts TDS at the time of crediting the interest amount or on accrual of interest, whichever happens earlier.
For example, if you have opted for a monthly or quarterly interest payout, the TDS will be deducted as and when the interest is paid out. If you have made a multi-year fixed deposit with interest payout on maturity, the interest will accrue at the end of the financial year. In this case, the bank will deduct TDS on interest accrual. The TDS is deducted at the rate of 10%. If the fixed deposit holder has not submitted their PAN to the bank, the TDS will be deducted at the rate of 20%.
In the absence of PAN, even if the Form 121 has been submitted, it will be considered invalid, and the TDS will be deducted at a higher rate of 20%. Also, in the absence of PAN, the bank will not issue the TDS certificate.
The bank issues the TDS certificate at the end of every calendar quarter. The certificate mentions the details of the fixed deposit, the interest amount, the TDS deducted (if any), etc.
Submission of Form 121
To avoid TDS deduction from the taxable interest income, a fixed deposit holder must submit the duly filled Form 121. The Form 121 specifies that the tax on the depositor’s estimated total income (interest income + other income) for the financial year will be nil.
The interest income up to a specified maximum amount will not be charged to tax during the financial year in which Form 121 is submitted. That specified maximum amount is as follows:
- Up to ₹12 lakh for senior citizens (age above 60 years) who are residents of India
- Up to ₹4 lakh for other citizens (age below 60 years) who are residents of India
Once the bank accepts and verifies the form, no further TDS will be applied for the remainder of the financial year. Any previously deducted TDS cannot be claimed from the bank, as it deposits the TDS with the government. The TDS already deducted can be claimed as a refund (if eligible) at the time of filing the Income Tax Return (ITR).
Form 121 has to be submitted at the start of every financial year (1 April) to avoid TDS on existing fixed deposits. For any new fixed deposit made during the financial year, after the submission of Form 121, a new Form 121 has to be submitted to avoid TDS on the interest income from the new fixed deposit.
Do you have fixed deposits with multiple banks? If yes, Form 121 must be submitted separately to each bank with which you have a fixed deposit. Form 121 is not applicable to NRIs, and the TDS is not applicable for interest earned on NRE deposits.
From 1 April 2026, Form 121 has replaced the earlier Form 15G and Form 15H, which were required to be submitted for TDS exemption. Individuals below the age of 60 years had to submit Form 15G, and those above the age of 60 years had to submit Form 15H. Form 121 is a unified form that an individual (whether below age 60 or above 60) must submit to avail a TDS exemption.
Why should you submit Form 121?
If your total taxable income is going to be below the specified exemption limit, you must submit Form 121 to avoid TDS deduction on the interest income payable on your fixed deposit(s). TDS exemption results in more money being payable to you, which would otherwise have been deducted as TDS and paid to the government. Form 121 submission ensures you don’t have to wait till you file your ITR to claim the excess tax (TDS) deducted as a refund.
Submitting Form 121 doesn’t mean a tax exemption
It is important to note that when you submit Form 121, the bank will not deduct TDS on the interest income that you earn. However, the interest income earned on fixed deposits still needs to be declared in your Income Tax Return under the ‘Income from Other Sources’ head.
All the incomes in the ITR will be added, and the total income will be considered. After applying all the applicable tax deductions and exemptions, the taxable income will be calculated. If taxable income exceeds the exemption limit, the income tax amount payable will be calculated. The income tax amount payable will be calculated on the individual’s tax slab and rate.
If you have paid any excess tax (in the form of TDS) than your total tax liability, you can claim the refund at the time of filing the ITR. Once your ITR is processed, the income tax refund will be credited to your savings bank account.
Make it a point to submit Form 121 at the start of every financial year
Submission of Form 121 is not mandatory. However, if Form 121 is not submitted, the bank will deduct the TDS. It will be deducted at the rate of 10% on the interest income payable on the fixed deposit(s), if the interest amount payable in a financial year exceeds the specified threshold. The depositor will have to wait till filing the ITR to claim the excess tax paid as an income tax refund.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.
