Many savers treat the tax deducted from their interest as the end of the matter. Usually it is not. Tax deducted at source is a collection mechanism: the payer deducts tax before paying you and deposits it with the government against your PAN. Your actual liability is settled when you file your return.
Where investors meet TDS
| Income | When TDS applies in tax year 2026-27 | Rate with PAN on record |
|---|---|---|
| Bank deposit interest | Interest from one bank exceeds ₹50,000 in the year (₹1 lakh for senior citizens) | 10% |
| Mutual fund IDCW and share dividends | Payouts from one payer exceed ₹10,000 in the year | 10% |
A higher rate applies if your PAN is not on record with the payer.
Three illustrations
For illustration, assume ₹1 lakh of bank interest in a year, with ₹10,000 deducted as TDS:
- Your slab is 30%. Tax on the interest is about ₹30,000 plus cess. ₹10,000 has been paid through TDS, so roughly ₹20,000 more is due — through advance tax during the year or when you file.
- Your slab is 5%. Tax on the interest is ₹5,000. You have paid ₹10,000, so about ₹5,000 comes back as a refund when you file.
- Interest of ₹40,000 instead. No TDS is deducted because the threshold is not crossed, but the ₹40,000 is still taxable at your slab rate.
Check your credits
The income tax portal's annual statements show the TDS credited against your PAN by each payer. Check them before filing, and ask the payer to correct any mismatch — a deduction that was not reported against your PAN cannot be claimed easily.
Preventing unnecessary deduction
If your total income for the year will be below the taxable limit, you can give each payer a self-declaration so that tax is not deducted. From 1 April 2026, a single Form 121 replaced the older Forms 15G and 15H for this purpose. Submit it early in the year, to every payer, and only if you genuinely qualify.
Cumulative deposits
TDS applies to interest as it accrues, even in a cumulative fixed deposit that pays nothing until maturity — see cumulative vs non-cumulative FDs. For the wider picture, read how investments are taxed in India.