Fixed Deposit Tax Changes Expected in Budget 2025: Ahead of the Budget speech by Finance Minister Nirmala Sitharaman, SBI Research has proposed the government to introduce a flat tax rate of 15% on income from bank fixed deposit (FD) across all maturities.
In a pre-budget report titled, Prelude to Union Budget 2025-2, SBI Research has also suggested that tax on fixed deposits, or term deposits, may be delinked from the highest income bucket. Further, the tax treatment of FD income should be similar to other asset classes by clubbing it in other income and taxing only at the time of redemption.
“15% tax on deposits and across all maturities and such tax treatment should be same like other asset classes, i.e. clubbing it in other income and taxing it at redemption and not accrual basis and increasing,” SBI Research proposed.
Currently, income from fixed deposits is taxed on an accrual basis. In other words, the interest income from FDs in a year is taxed at the highest tax slab applicable to a depositor. However, this is not the case with other asset classes like mutual funds and direct stocks.
Income from investments in direct stocks and mutual funds is taxed at redemption. Additionally, the government has also fixed flat rates for taxing long-term and short-term gains from equity stocks and mutual funds.
How will the change in FD taxation affect government revenue?
According to the report, the introduction of a flat 15% tax may lead to a revenue loss of ₹10,500 crore.
“Term deposits, that have witnessed greater favor with savers with elevated rates attracting higher proportions, may witness a revenue foregone figure of ₹10,500 crore if current tax treatment across maturity ladder is to be replaced by a simple flat 15% rate across all maturity,” the report said.
