Budget 2025: Good News for Fixed Deposit Investors
Budget 2025 has brought some positive changes for individuals investing in fixed deposits (FDs). Finance Minister Nirmala Sitharaman has announced an increase in the tax deduction limit on interest earned from FDs in this year’s general budget.
This change will especially benefit senior citizens, as the tax exemption limit on their interest income has doubled. As a result, savers can expect better returns with reduced tax liabilities.
Changes in TDS Rules
Under the new rules from Budget 2025, the tax deduction at source (TDS) limit for ordinary citizens has been raised from ₹ 40,000 to ₹ 50,000. This means that if an investor earns up to ₹ 50,000 in interest, no TDS will be deducted. This change offers relief to small and medium investors by reducing their tax burden on interest income.
For instance, if Geeta, a 35-year-old investor, earns ₹ 50,000 annually from her FD, she will no longer face any TDS deductions. However, if her interest exceeds ₹ 50,000, she will need to pay tax on the additional amount.
Benefits for Senior Citizens
This budget is particularly advantageous for senior citizens (those over 60 years old). The TDS exemption limit on their FD interest income has increased from ₹ 50,000 to ₹ 1,00,000. This allows them to earn up to ₹ 1 lakh in interest without any TDS deductions.
The increased tax exemption will not only apply to fixed deposits but also to Sovereign Bonds, providing better returns and enhancing financial security for senior citizens.
Understanding TDS
TDS works as follows: if your interest income is within the specified limits, no TDS will be deducted. If the interest exceeds the limit, a 10% TDS will be deducted if you have a PAN card. If you do not possess a PAN card, the TDS rate will be 20%. In the case of joint FDs, TDS will be applied to the main account holder’s name.
If you are considering investing in FDs, it’s essential to know which banks are currently offering the highest interest rates. Small finance banks typically provide better rates, leading to good returns for investors.
Frequently Asked Questions
1. **Who can avail TDS exemption on FD in Budget 2025?**
All FD investors whose interest income is within the specified limits will benefit from the new rules. The TDS limit is now ₹ 50,000 for ordinary citizens and ₹ 1,00,000 for senior citizens.
2. **What should I do if my interest income exceeds ₹ 50,000?**
If your interest income is more than ₹ 50,000, the bank will deduct 10% TDS if you have a PAN card. Without a PAN card, the TDS rate will be 20%.
3. **Will senior citizens receive additional benefits?**
Yes, senior citizens now enjoy double the benefit compared to before, with no TDS up to ₹ 1,00,000 on their interest income.
4. **Will this exemption apply to all types of FD?**
Yes, the exemption applies to both bank FDs and Sovereign Bonds.
5. **How can I save on tax?**
If your income is tax-free after deductions, you can avoid TDS by submitting Form 15G (for general citizens) or Form 15H (for senior citizens).
Conclusion
Budget 2025 has provided significant relief to fixed deposit investors. The new TDS rules will allow small and medium investors to enjoy tax exemptions, leading to better returns on their savings. For senior citizens, this decision will be financially advantageous. If you are thinking of investing in FDs, now is an excellent time, as the new rules will result in lower tax deductions on your interest income, maximizing your benefits.
