Tds on fd interest - social cause exemption
This query is : Resolved
06 December 2018
Can TDS on FD interest be exempted for Social Cause
07 December 2018
No such provision is there in income tax laws.
07 December 2018
Sir Revenue and Disaster Management of a district has given a FD of some crores to a bank in which concurrent audit is being conducted by our firm. They have requested a letter to the bank saying no to deduct TDS on interest as the Deposit is for Social cause. So we said this is not valid. We can object saying there is no such provision in IT. Right Sir?
27 July 2025
You're absolutely right!
---
### Key points:
* **There is no provision under the Income Tax Act that exempts TDS deduction on FD interest for deposits made for social causes.**
* TDS on interest income is based on the **nature of income** (interest) and **not the purpose of the deposit**.
* Even if the FD is made by a government or social cause organization, the **bank is legally required to deduct TDS** as per the applicable threshold and rates.
* **No letter or exemption request can legally prevent the bank from deducting TDS** on FD interest based on social cause or disaster management purpose.
---
### So yes, you can inform the concerned authorities that:
> *"There is no provision in the Income Tax Act or Rules that exempts TDS on interest income from fixed deposits, even if the deposit is for social or charitable purposes. Hence, the bank must deduct TDS as per law."*
---
If the organization is eligible for any exemption or lower deduction certificate, that would be under specific sections like 80G or certificate under section 197—but those relate to income tax liability, not to TDS exemption on FD interest.
---
Let me know if you want me to help draft a formal letter on this!
---
### Key points:
* **There is no provision under the Income Tax Act that exempts TDS deduction on FD interest for deposits made for social causes.**
* TDS on interest income is based on the **nature of income** (interest) and **not the purpose of the deposit**.
* Even if the FD is made by a government or social cause organization, the **bank is legally required to deduct TDS** as per the applicable threshold and rates.
* **No letter or exemption request can legally prevent the bank from deducting TDS** on FD interest based on social cause or disaster management purpose.
---
### So yes, you can inform the concerned authorities that:
> *"There is no provision in the Income Tax Act or Rules that exempts TDS on interest income from fixed deposits, even if the deposit is for social or charitable purposes. Hence, the bank must deduct TDS as per law."*
---
If the organization is eligible for any exemption or lower deduction certificate, that would be under specific sections like 80G or certificate under section 197—but those relate to income tax liability, not to TDS exemption on FD interest.
---
Let me know if you want me to help draft a formal letter on this!
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