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Interest from savings accounts, fixed deposits, recurring deposits, post-office deposits and similar products is generally taxable. TDS by a bank is only a collection mechanism; it does not determine the final taxable amount.

What interest is taxable?

• Savings-account interest: taxable under Income from Other Sources unless it forms part of business income.
• Fixed and recurring deposit interest: taxable, including cumulative deposits where interest is credited or accrued periodically.
• Post-office and co-operative-bank interest: taxable unless a specific exemption applies to the product.
• Interest on income-tax refund: taxable under Income from Other Sources.

Interest is recognised according to the method of accounting regularly followed by the taxpayer. A cash-basis taxpayer ordinarily offers it on receipt, while a mercantile-basis taxpayer offers it on accrual. Bank credit and TDS records should be reconciled with that method.

Deductions for savings and deposit interest

Section 80TTA does not cover fixed-deposit or recurring-deposit interest. A resident senior citizen eligible for section 80TTB should not separately claim section 80TTA.

TDS on bank and deposit interest

From 1 April 2025, the section 194A threshold is generally:

• ₹1,00,000 for a senior citizen where interest is paid by a bank, co-operative bank or notified post-office scheme;
• ₹50,000 for other recipients where paid by a bank, co-operative bank or post office; and
• ₹10,000 in other cases covered by section 194A.

The normal TDS rate is 10% where valid PAN details are available. These thresholds only decide whether the payer deducts tax. Interest below the threshold can still be fully taxable.

Example

A resident senior citizen earns savings interest of ₹18,000 and FD interest of ₹72,000. Total interest is ₹90,000. Under the old regime, section 80TTB can reduce taxable interest by ₹50,000, leaving ₹40,000 taxable. Under the default new regime, the ₹50,000 deduction is not available and the full ₹90,000 is included in total income.

How to report interest in the ITR

1. Collect bank interest certificates and annual statements for every account and deposit.
2. Compare them with AIS and Form 26AS. Check accrued interest and prematurely closed deposits.
3. Enter the gross interest in Schedule OS, classified as savings, deposits or other interest as applicable.
4. Claim section 80TTA or 80TTB in the deduction schedule only if the old regime and eligibility conditions apply.
5. Enter TDS credit in the TDS schedule exactly against the deductor's TAN and income offered.

Common reconciliation issues

• Joint-account interest may be reported by the bank against the first holder's PAN even though beneficial ownership differs.
• A cumulative FD may show annual TDS although cash is received only on maturity.
• Interest may appear in AIS for more than one bank branch or under separate product descriptions.
• Form 26AS may show TDS but not the complete gross interest; use the bank certificate to determine income.

1961 Act and 2025 Act comparison

Conclusion

Prepare an account-wise interest reconciliation, report gross income, claim only the deduction permitted by the selected regime, and separately match the TDS credit.