How can I avoid TDS being deducted on my fixed deposit interest if my income is below the taxable limit

Question

My total income is below the taxable threshold but the bank is still deducting TDS on my fixed deposit interest, and I want to know how to stop this. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

How can I avoid TDS being deducted on my fixed deposit interest if my income is below the taxable limit is governed in India primarily by Income-tax Act, 1961, Section 197A, Income-tax Act, 1961, Section 194A and Income-tax Act, 2025. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 194A of the Income-tax Act, 1961 requires banks and other payers to deduct TDS on interest income, such as fixed deposit interest, once it exceeds the prescribed threshold in a financial year, regardless of whether your total income is actually taxable, unless you take a specific step to inform the payer that your income does not warrant deduction.

Section 197A allows an individual whose estimated total income for the year is below the basic exemption limit, or below the level at which tax is payable after rebate, to submit a self-declaration in Form 15G, or Form 15H for senior citizens, to each bank or institution separately, requesting that TDS not be deducted on interest income.

Form 15G or 15H must be submitted at the beginning of the financial year, or before the first interest credit, to each branch or institution where you hold deposits, since the declaration applies only to the specific deductor it is submitted to, and it must be renewed every financial year as it is not valid indefinitely.

Filing Form 15G or 15H when your actual total income does exceed the taxable threshold is a false declaration and can attract consequences under the Act, so this declaration should only be used where you genuinely expect your total income for the year to remain within the specified limit after accounting for all sources of income.

What to do next: 1) Estimate your total income for the year across all sources; 2) Submit Form 15G or Form 15H to each bank at the start of the financial year; 3) Renew the declaration every year before interest is credited; 4) File a return and claim TDS refund if deduction has already occurred.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Income-tax Act, 1961, Section 197A carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.