First task for FD investors to save TDS in new financial year is filing form 15G/H; Check the annual income that makes you eligible

For a number of savers in India, fixed deposits are the go-to investment. They are simple, predictable, and widely trusted. You deposit your money with the bank, earn interest every year, and watch the amount steadily grow.

There is, however, a quiet drag on that growth that most investors overlook: Tax Deducted at Source (TDS) on interest income.

The loss is not only the TDS amount which is typically refunded to eligible investors after ITR processing. There is an additional loss, which is the loss of opportunity to earn compounding interest on the deducted TDS amount.


Many depositors hardly notice it because the deduction happens automatically. Yet over long periods, this small tax cut can reduce the power of compounding and leave investors with significantly less money at maturity.

That is where Form 15G and Form 15H could make a difference, provided you are eligible.

How TDS reduces the compounding effect

Every time a bank deducts TDS on interest, that money leaves your deposit immediately. It doesn’t sit and wait for your refund. It stops working. And in a compounding instrument, money that stops working, doesn’t just pause — it disappears from the equation entirely.

The annual deduction may appear modest, but the effect becomes clearer over longer investment horizons.

“Investors lose not only the tax deducted but also the additional returns that amount could have generated if it had remained invested. Over a period of ten years or more, this can create a noticeable difference in the final maturity value of the deposit,” explains Adhil Shetty, CEO, BankBazaar.

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Suppose you invest ₹10 lakh in a fixed deposit earning 7% annually. If the entire interest is allowed to compound without any deduction, the investment would grow to about ₹19.67 lakh in 10 years and roughly ₹27.6 lakh in 15 years.
Now imagine that 10% TDS is deducted from the interest every year and that amount is not reinvested. In effect, only about 90% of the interest continues to compound, reducing the effective return to roughly 6.3%.

Investment Scenario	Annual Effective Return	Value After 10 Years	Value After 15 Years	Wealth Difference
No TDS deducted (full compounding at 7%)	7%	₹19.67 lakh	₹27.60 lakh	—
10% TDS deducted each year (only 90% interest reinvested)	~6.3%	₹18.42 lakh	₹25.03 lakh	₹1.25 lakh less (10 yrs) / ₹2.57 lakh less (15 yrs)

Source: BankBazaar

In this scenario, the same ₹10 lakh deposit would grow to about ₹18.42 lakh after 10 years and around ₹25.03 lakh after 15 years. In other words, the investor could end up with nearly ₹1.25 lakh less after 10 years and about ₹2.5 lakh less after 15 years!

“The difference arises because a portion of the interest leaves the compounding cycle each year, gradually reducing the base on which future returns are calculated,” Shetty says.

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How Form 15G and Form 15H can help save TDS and who is eligible?

To prevent unnecessary TDS deductions, the income tax system allows certain depositors to submit a self-declaration to their banks. This is done through Form 15G for individuals below 60 years and Form 15H for senior citizens.

However, these forms can only be submitted if the taxpayer expects no tax liability for the year, says Sudhir Kaushik, Co-founder & CEO, TaxSpanner.

If the declaration is valid, the bank does not deduct TDS on the interest earned.
A frequent mistake while submitting Form 15G or 15H is miscalculating income by looking only at interest from one bank, he adds.

Many depositors have multiple fixed deposits across different banks. But when submitting Form 15G or 15H, they must consider total interest income across all banks, not just the one where the form is being submitted. The declaration also needs to be given separately to each bank.

Timing is another detail that people often overlook. The declaration has to be submitted every financial year, ideally at the beginning of the year. If the form is submitted late, the bank may have already deducted TDS on the interest credited earlier.

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What if TDS has already been deducted?

Even if TDS has been deducted from your interest income, the money is not necessarily lost.
If your actual tax liability is lower or zero, the deducted amount can be recovered while filing your income tax return.

Kaushik explains that taxpayers should check whether the deducted amount appears in Form 26AS or the Annual Information Statement (AIS).

“If TDS has been deducted on fixed deposit interest but the depositor’s final tax liability is lower, the excess can be claimed as a refund while filing the Income Tax Return (ITR),” he says.

Any excess amount will be refunded by the Income Tax Department after return processing, he adds.

Forms 15G and 15H may seem like routine paperwork, but they play an important role in protecting the compounding power of savings.

For depositors who are eligible, submitting the form on time ensures that their interest income stays invested instead of being partially removed each year through TDS.

Over long periods, that difference, small at first, can quietly add up to lakhs of rupees in extra wealth.