Savings account, fixed deposits: Two tax changes proposed by SBI Research, what bank depositors need to know

Bank depositors could see changes in the taxation of savings account interest and fixed deposit (FD) earnings if proposals made by SBI Research are considered by the government.

In its November 2, 2026 edition of Ecowrap, SBI Research has proposed raising the tax exemption threshold on savings account interest from ₹10,000 to ₹20,000. It has also suggested replacing the existing tax treatment of term deposits across different maturities with a flat 15% rate.

The proposals come amid concerns about the declining share of bank deposits in household financial savings and the growing preference for other investment avenues, including equities.

SBI Research said, "To arrest the fall of deposits in household financial savings, we strongly propose tax adjustments for bank deposits."

1. Savings account interest exemption limit could rise to ₹20,000

SBI Research has proposed doubling the existing ₹10,000 exemption threshold on savings account interest to ₹20,000.

"The threshold for tax exemptions on Savings deposit at Rs 10,000 may be reconsidered and raised to Rs 20,000," the report said.

The research team estimates that this change could result in revenue foregone of approximately ₹1,531 crore, assuming a flat interest rate of 4%.

SBI Research believes a higher exemption limit could help strengthen banks' deposit base and support financial stability by encouraging household savings in bank accounts.

2. SBI Research proposes flat 15% tax rate on fixed deposits

The report estimates that this proposal could result in revenue foregone of approximately ₹10,500 crore.

Currently, interest earned on bank FDs is generally taxable according to the depositor's applicable income tax slab, subject to applicable tax provisions.

If implemented, SBI Research's proposal would change the way FD interest is taxed, irrespective of the deposit's maturity.

Combined revenue impact could be around ₹12,000 crore

SBI Research estimates that the combined revenue foregone from the proposed changes to savings account and term deposit taxation could be approximately ₹12,000 crore.

The research team argues that the existing tax treatment creates a difference in incentives between equity investments and bank deposits.

"Otherwise, the incentives for investment in equities would significantly outweigh the incentives for investment in bank deposits," the report said.

What should bank depositors know?

The proposals could change the tax treatment of savings account interest and fixed deposit earnings if accepted by the government. However, they remain recommendations by SBI Research and are not announced policy changes.

For now, existing tax provisions continue to apply. Depositors should not assume that the proposed ₹20,000 exemption or flat 15% FD tax rate is currently available.