Income tax dept clarifies TDS on bank interest: No deduction below Rs 50,000/Rs 1 lakh limit
Income Tax dept clarifies TDS on bank interest: The Income Tax Department on Monday issued a clarification regarding the deduction of tax at source (TDS) on interest earned from bank deposits under the new Income Tax Act, 2025.
According to existing provisions, banks are required to deduct TDS only if the interest income exceeds Rs 50,000 in a financial year for regular depositors, while the limit stands at Rs 1 lakh for senior citizens.
In a post on X, the department explained that under Section 402 of the new law, the term “banking company” refers to entities governed by the Banking Regulation Act, 1949. The clarification further stated that even banks and financial institutions covered under Section 51 of the Banking Regulation Act will continue to fall within the definition of a “banking company,” as was the case under the Income Tax Act, 1961.
The department emphasised that these institutions will follow the same TDS rules, meaning no tax will be deducted if the interest income remains below the specified threshold.
- With inputs from agencies
