New Income Tax Act: Good news for FD holders, Income Tax Department changed the TDS limit; Now tax will be deducted on this much interest

Income Tax Department On TDC Deduction: The Income Tax Department has clarified the situation regarding the rules of tax deduction (TDS) on interest received on money deposited in banks and post offices. In an official statement issued by the department on Monday, it has been said that all the banking companies operating under the Banking Regulation Act, 1949 will have to deduct TDS only if the interest income exceeds the prescribed limit.

This step has been taken to remove the technical confusion that has arisen regarding the definition of banking institutions and their compliance after the implementation of the New Income Tax Act, 2025.

TDS limit for citizens?

The limits of TDS deduction for depositors are clearly defined under the existing provisions of the Income Tax Act. according to the rules-

• If an ordinary citizen receives interest of more than Rs 50,000 from money deposited in a bank or post office in a financial year, tax will be deducted at source on it.
• Giving relief to senior citizens, this limit has been fixed at Rs 1 lakh per financial year.
• The Income Tax Department has also made it clear that no such bank or banking institution will be required to deduct income tax if the amount is less than this limit given in Section 393 (1).

Definition of banking in the new law

In an official post on social media platform Income Tax Department has explained in detail the rules related to TDS deduction under the new tax laws. Under Section 402 of the New Income Tax Act, 2025, a banking company is one to which the provisions of the Banking Regulation Act, 1949 apply.

What about the old Income Tax Act?

In the old Income Tax Act, 1961, the scope of banking company not only included those companies to which the Banking Regulation Act, 1949 was applicable, but also clearly included banks or banking institutions covered under Section 51 of that Act. On the confusion created due to lack of direct mention of Section 51 in the new law, the department has clarified that with the effect of the existing Section 51 of the Banking Regulation Act, 1949, all such banks and institutions, even without any clear mention, will be considered as banking companies under Section 402 of the new Income Tax Act, 2025.

Also read: What is the interest rate on Sukanya Samriddhi, PPF and NSC? Rates announced for the next quarter, will be applicable from April 1

What relief for the common man?

Due to this clarification of the department, lakhs of depositors of the country tds deduction Transparency regarding this will be ensured and they will be relieved from the worry of tax being deducted without any reason. With this, the path of compliance has been cleared for all the banking and financial institutions of the country. With this, the process of tax deduction at the end of the financial year will run smoothly and there will be no scope for any kind of legal or technical dispute.