Beware! Banks are monitoring interest earnings; tax will be deducted once the ₹50,000 limit is exceeded

The Income Tax Department said on Monday that a "banking company" covered under the provisions of the Banking Regulation Act, 1949, will deduct TDS on interest income exceeding a prescribed limit. 

According to the Income Tax Act, TDS is deducted if interest income from bank or post office deposits exceeds Rs 50,000 for ordinary citizens and Rs 1 lakh for senior citizens in a financial year.

The Income Tax Department informed on the social media platform X that under Section 402 of the new Income Tax Act, 2025, banking company means companies to which the Banking Regulation Act, 1949 applies. 

The definition of banking company under the Income Tax Act, 1961 includes not only those companies but also any bank or banking institution mentioned in Section 51 of that Act.

Clarification on TDS on interest u/s Section 194A in the case of banking institutions.

Under the provisions of Section 194A of the Income-tax Act, 1961, tax is required to be deducted at source on interest other than interest on securities. However, in terms of provisions of

— Income Tax India (@IncomeTaxIndia) March 30, 2026

The department clarified that such banks and banking institutions, which are currently covered under section 51 of the Banking Regulation Act, 1949, 

will be deemed to fall within the definition of banking company under section 402 of the Income Tax Act, 2025, even if they are not specifically mentioned. 

The Income Tax Department said that such banks or banking institutions will not be required to deduct income tax on amounts less than the limit prescribed under section 393(1).

Income Tax