Interest earned on a fixed deposit is taxable as per the individual's tax slab. So banks deduct TDS(tax deducted at source) from your interest income once it crosses Rs 10,000 mark in a year. But for senior citizens (above the age of 60), TDS will be applicable only if the interest income crosses Rs 50,000 mark in a financial year. This is applicable from the last financial year after the Budget 2018 gave senior citizens exemption up to Rs 50,000 on interest income in a financial year. Banks and financial institutions deduct 10% TDS once your interest income crosses the above threshold limit.

If you do not have a taxable income - less than Rs 2.5 lakh in a year or Rs 3 lakh in case of senior citizen and Rs 5 lakh for super senior citizens - you can avoid TDS deduction from your interest income.

You can submit either Form 15G or 15H depending on your age with the bank to avoid TDS deduction from your interest income. If you are less than 60 years and have interest income of more than Rs 10,000 but an annual income of less than Rs 2.5 lakh then Form 15G is applicable for you.

If you are a senior citizen and your annual interest income is more than Rs 50,000 and annual income is less than Rs 3 lakh or less than Rs 5 lakh (for people over 80 years age), then you have to submit Form 15G with the bank.

But the moment your annual income crosses the taxable limit, you need to inform the bank and withdraw the forms so that they will start deducting TDS from your annual income. If your annual income crosses Rs 5 lakh then you are liable to pay 20% tax on the interest income and 30% if annual income crosses Rs 10 lakh mark. You may be required to pay a late fee on the tax amount while paying the differential tax at the time of filing income tax return due to the delay in tax payment or as a penalty for not depositing tax in advance.