TDS rules updated, savings rate steady
The Government on Monday announced a set of updates affecting interest income and savings instruments, clarifying tax deduction rules on bank deposits while keeping interest rates on small savings schemes unchanged for yet another quarter.
The Income Tax Department said that a “banking company” governed by the provisions of the Banking Regulation Act, 1949, will be responsible for deducting Tax Deducted at Source (TDS) on interest income exceeding prescribed thresholds. Under income tax laws, TDS applies if interest earned from bank or post office deposits crosses INR 50,000 in a financial year for ordinary citizens and INR 1 lakh for senior citizens.
In a post on X, the department clarified that under Section 402 of the Income Tax Act, 2025, a “banking company” refers to entities to which the Banking Regulation Act applies. It added that the scope also covers banks and banking institutions referred to under Section 51 of that Act, even if not explicitly mentioned in the new law. As a result, such institutions will not be required to deduct income tax on amounts below the specified thresholds under Section 393(1).
Separately, the Government said it has decided to keep interest rates on small savings schemes unchanged for the eighth consecutive quarter, starting April 1, 2026. In a notification, the finance ministry said rates for the April-June quarter of FY 2026-27 will remain the same as those in the January-March quarter of FY 2025-26.
With this decision, interest rates on small savings instruments-widely used by retail investors through post offices and banks-have now remained steady since the last revision in the fourth quarter of 2023-24.
