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A company's bank credits FD interest net of TDS and the accounts team books only the net amount, so the TDS credit is lost or mismatched.
Book gross interest, cash received and TDS receivable separately, then match the TDS receivable to the bank's entries in the credit statement each quarter.
One TDS receivable sub-ledger per bank with FD number, accrual date, gross interest and TDS from the interest certificate.
Interest income at gross, a TDS receivable balance that agrees with Form 26AS, and any gap explained.
Book three numbers, not one. Record the gross interest as income, the amount the bank actually credited as cash, and the TDS (tax deducted at source) the bank withheld as TDS receivable. Then, after the bank files its quarterly TDS return, match that TDS to the bank’s entry in your TDS credit statement (Form 26AS, or Form 168 from tax year 2026-27).
How much TDS does a bank deduct on a company’s FD?
Under Section 194A of the Income-tax Act 1961 (now within Section 393 of the Income-tax Act 2025), a bank deducts 10% on interest it pays or credits, once the interest from that bank in the year is above ₹50,000. That limit applies from 1 April 2025; it was ₹40,000 before. A company cannot submit Form 15G. If it expects no tax liability, it can apply for a lower deduction certificate.
Worked example: the journal entry
A packaging company earned ₹1,20,000 interest on a fixed deposit in 2026-27. The bank deducted 10% TDS, so ₹12,000, and credited ₹1,08,000.
| Account | Debit | Credit |
|---|---|---|
| Bank account | ₹1,08,000 | |
| TDS receivable (bank name) | ₹12,000 | |
| Interest income on FD | ₹1,20,000 | |
| Total | ₹1,20,000 | ₹1,20,000 |
A common mistake is to book ₹1,08,000 as interest income. That understates income by ₹12,000 and leaves no TDS receivable to claim. At year end, the ₹12,000 is set off against the company’s tax.
What should I compare each quarter?
| Source | What it shows | Should agree with |
|---|---|---|
| Bank’s interest certificate | Gross interest and TDS per FD | Your books |
| Bank statement | Net credit of interest, if paid out | Books, bank account line |
| Your books | Gross interest and TDS receivable | Certificate and Form 26AS |
| Form 26AS or Form 168 | TDS by the bank’s TAN, by quarter | TDS receivable ledger |
Why does Form 26AS show the bank’s TDS in a different quarter?
Banks often deduct TDS when interest accrues, not when it is paid. On a cumulative FD that pays out at maturity, the bank may still deduct TDS each year or each quarter. So Form 26AS can show TDS in a quarter when no cash came in. Also, Form 26AS lists TDS by the bank’s TAN, often as a single total. It does not split by FD number. Use the bank’s interest certificate to split it.
What if the bank deducted TDS on accrued interest, or when interest is below the limit?
If the bank deducted on accrued interest, book that accrued interest as income in the same year, so income and TDS match. If total interest from that bank is below ₹50,000 but TDS was deducted anyway, check whether the bank counted deposits across branches together, as banks usually do. If the deduction is still wrong, the TDS is not lost. Claim it in your return and any excess comes back as a refund.
What to read next
- Next: TDS receivable ledger reconciliation for matching many deductors.
- Section detail: TDS on interest under Section 194A.
- If the statement shows more than your books, read why Form 26AS shows more TDS than your books.
TransactIG matches bank statement credits to your books and reconciles TDS receivable against your credit statement, with mismatches in an exception queue.