- The Income Tax Act 2025 is applicable from 1 April 2026.
- Under the new Income Tax Act, 2025, interest earned on FDs and Kisan Vikas Patra (KVPs) continues to be a taxable source of income.
Being aware of these rules can help you report your income correctly, avoid tax-related mistakes and ensure smooth filing of your income tax return.
TDS rules for fixed deposit interest
This applies even to cumulative fixed deposits, where the interest is added to the deposit and not paid out during the financial year. In such cases, TDS may still be deducted on the accrued interest.
KVP interest remains fully taxable despite no TDS
Therefore, as explained above, the absence of TDS on KVP should not be mistaken or wrongly interpreted as a ‘tax exemption’; hence, any investor in these schemes should report their gains, if any, appropriately while filing their ITRs.
On similar lines, taxpayers who earn interest from fixed deposits should never presume that the ‘tax deducted at source’ by the banking institution fully resolves and settles their tax liability. This is because the final tax liability primarily depends on an individual’s applicable tax slab and total income.
In short, a clear and crisp understanding of the tax treatment of interest income from both FDs and KVPs can help individuals plan their finances more effectively and facilitate proper, accurate compliance with tax authorities for all eligible taxpayers.
This is because it can help them avoid reporting errors, omissions, and mistakes, reconcile TDS with their tax returns, and ensure compliance with the provisions of the Income Tax Act, 2025.
Disclaimer: This article is intended for informational purposes only and should not be construed as legal, tax, or financial advice. Tax laws are subject to interpretation and may change over time. Readers are advised to consult a qualified tax professional or financial advisor before making any investment or tax-related decisions based on their individual circumstances.