Union Budget which was presented on Feb 1, 2025 proposed to increase limit for tax deduction at source (TDS) for general citizens from current limit of 40,000 to 50,000 annually. These amendments will be into action from upcoming fiscal year 2025 – 2026 on April 1st, 2025.Â
Understanding TDS (Tax Deduction at Source)
A tax-saving fixed deposit (FD) account is a type of fixed deposit account that offers a tax deduction under Section 80C of the Income Tax Act, 1961. Any investor can claim a deduction of a maximum of Rs. 1.5 lakh per annum by investing in a tax-saving fixed deposit account . In case interest amount generated from Fixed deposits exceeds certain threshold limit, banks will deduct tax when interest income is deposited in your account. Limit varies for general and senior citizen , till fiscal year 2024-2025 it was 40,000 for general citizens & 50,000 for senior citizens. Amount of TDS deducted from account is 10% from interest earned provided valid PAN verified account.Â
What all Changes with detailed calculation logic
- Change in deduction limit for General citizens (Age less than 60 years)Â
Mr. X have deposited 10 lakh rupees in bank FD schemes with 8% FD rates annually would yield him 80,000 rupees as annual interest rate. With Current limit of 40000 , he will have to pay 10% TDS on amount earned more than 40,000 which will be 4000 over 40000 incrementality of TDS limit. Effective April 1 , 2025 with revised limit of 50,000 , he will have to pay 3000 TDS as incremental amount will get revised to 30,000 with this new limit
2. Change in deduction limit for Senior citizens (Age of 60 years or more )Â
Mr. Y have deposited 10 lakh rupees in bank FD schemes with 8% FD rates annually would yield him 80,000 rupees as annual interest rate. With Current limit of 50000 , he will have to pay 10% TDS on amount earned more than 50,000 which will be 3000 over 30000 incrementality of TDS limit. Effective April 1 , 2025 with revised limit of 1,00,000 , he will have to pay 0 TDS as there is no incremental amount.Â
With this change of norm moving 40,000 to 50,000 limit for General citizens & 50,000 limit to 1,00,000 for senior citizens will benefit you from upcoming financial year. With this tax exemption specially for senior citizens they will experience more financial security & reduced tax burdens.Â