I-T Dept clears air on TDS for bank interest

New Delhi: The income tax department on Monday said “banking company” governed by the provisions of the Banking Regulation Act, 1949, will deduct TDS on interest income beyond the prescribed threshold. Under the Income Tax law, the tax is to be deducted at source if the interest income from bank/post office deposits exceeds Rs 50,000 for ordinary citizens, or Rs 1 lakh for senior citizens, in a financial year.

In a post on X, the income tax department said under Section 402 of the new Income Tax Act, 2025, a “banking company” refers to a company to which the provisions of the Banking Regulation Act, 1949, apply. As per the Income-tax Act, 1961, the scope of “banking company” included not only banking companies to which the Banking Regulation Act, 1949, applies, but also “any bank or banking institution referred to in section 51 of that Act.