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Personal Finance News

Income-tax calculator: Fixed deposit interest up to ₹12 lakh can be tax-free from FY 2025-26

rajeev kumar
By Rajeev Kumar

3 min read | Updated on February 05, 2025, 13:42 IST

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SUMMARY

Tax calculation for income from fixed deposit in FY 2025-26: New rates announced in budget 2025 will help a taxpayer save up to 82,000 in taxes if earning ₹12 lakh only from fixed deposit.

tax benefit calculator 2025-26 for fixed deposit

Income up to ₹12 lakh will become tax free due to the revised slab and rebate in the new regime. | Image source: Shutterstock

From Financial Year 2025-26, your income up to ₹12 lakh from fixed deposits can be tax-free. But there's a catch! You must not have income from any other sources. This article explains how this will be possible along with an example.

Budget 2025 has proposed to make income up to ₹12 lakh tax-free under the new tax regime from the next financial year (FY 2025-26), starting from April 1, 2025. For salaried employees, the tax-free income limit will be ₹12.75 lakh due to a standard deduction of ₹75,000 in the new regime.

According to the proposal announced by Finance Minister Nirmala Sitharaman in Budget 2025, income up to ₹12 lakh will become tax-free due to the revised slab and rebate in the new regime.
The basic exemption limit under the new regime will increase from ₹3 lakh to ₹4 lakh. Also, there will be a rebate of ₹60,000 under section 87A, making normal incomes up to ₹12 lakh tax-free. However, this benefit will not apply to special rate incomes.
Since the budget speech by the finance minister, many taxpayers have been confused about the difference between normal and special rate incomes. We've sorted it out for you with this full list of special rate incomes on which tax will not be free till ₹12 lakh.

Now, coming to normal incomes.

Normal incomes on which no tax will apply till ₹12 lakh include all types of incomes that are taxed at respective slab rates of individual taxpayers. This means incomes from salary, pension, fixed deposits etc. will qualify for a ₹60,000 rebate till ₹12 lakh.

The new proposal will help many taxpayers save more in the next financial year, compared to the current financial year, especially those who are fully dependent on interest incomes from bank deposits.

Let's understand this with the example of a person earning ₹12 lakh only from fixed deposits:

ParticularsNew regime (FY 2024 - 2025)New regime (FY 2025 - 2026)
Total income from fixed deposit₹12,00,000₹12,00,000
Total taxable income₹12,00,000₹12,00,000
Income tax slab₹10,00,001 - ₹12,00,000₹8,00,001 - ₹12,00,000
Tax payable₹80,000₹60,000
Tax payable after rebate*₹80,000₹0
Final tax payable (Includes health and education cess)₹83,200₹0

*Tax rebate of ₹60,000 on normal income up to ₹12 lakh applicable from FY 2025-26

As you can see in the above table, a person having income only from fixed deposit will save ₹83,200 in taxes under the new regime from the next financial year. You can calculate the benefit of the tax changes announced in Budget 2025 here.
Please note the tax calculation will be different in case you have income from other sources such as salary, pension, capital gains, rent etc. You can get an estimate of your tax liability by using this calculator or by consulting a tax expert.
Upstox

About The Author

rajeev kumar
Rajeev Kumar is a Deputy Editor at Upstox, and covers personal finance stories. In over 11 years as a journalist, he has written over 2,000 articles on topics like income tax, mutual funds, credit cards, insurance, investing, savings, and pension. He has previously worked with organisations like 1% Club, The Financial Express, Zee Business and Hindustan Times.

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