Banks and institutions under this definition are required to deduct TDS only on interest above the prescribed thresholds.

Income Tax Dept Clarifies 2026 Bank TDS: Rs 50,000 for Regular Citizens, Rs 1 Lakh for Seniors

The Income Tax Department has announced new guidelines for tax deduction at source (TDS) on interest earned from bank and post office deposits. These rules apply to all banks and banking institutions regulated under the Banking Regulation Act, 1949.

Interest income will only be taxed if it exceeds certain limits. Regular depositors will face TDS on amounts over 50,000 rupees in a financial year, while senior citizens have a higher threshold of one lakh rupees. Amounts below these limits will not have tax deducted.

The department clarified that the term “banking company” under the new Income Tax Act, 2025, includes all banks covered by the Banking Regulation Act, 1949. It also covers institutions listed in Section 51 of the act, even if they are not explicitly named in the new tax law.

Banks and institutions under this definition are required to deduct TDS only on interest above the prescribed thresholds. Section 393(1) of the Income Tax Act, 2025, confirms that deposits under the limits are exempt from tax deduction.

Banks and depositors should follow the prescribed thresholds when calculating TDS on interest income.