Forgot to Declare FD Interest in ITR for AY 2025-26? Taxpayers Can Still Correct the Mistake Through ITR-U

Key Takeaways

• Taxpayers who did not include the fixed deposit (FD) interest income in their ITR for AY 2025-26 can rectify the error by filing an Updated Return (ITR-U) within the allowable period.
   
• The government had earlier informed taxpayers that FD interest is entirely taxable even though the bank deducted TDS. It requires complete information under the Income Tax Act.

What would be the Scenario If FD Interest was not Mentioned in the ITR for AY 2025-26?

There is still a chance left for those taxpayers who filed their ITR for AY 2025-26 and forgot to declare FD interest income in their returns. This can be done by filing an Updated Return (ITR-U), as advised by tax experts. 

The taxpayer should pay extra taxes and file within the specified period of time. FD interest is taxable in India under the head ‘income from other sources’ even if the bank has deducted the TDS.

The reason why it needs to be corrected lies in the fact that the authorities compare the taxpayer’s information with data supplied by banks through AIS and Form 26AS.

How Will This Rule Affect FD Investors Across India?

Millions of salaried employees and retirees depend on FDs for regular income. Missing even a small amount of FD interest can create tax discrepancies because banks report interest payments directly to the tax department. Timely correction helps taxpayers avoid future disputes and interest liabilities.

LoansJagat highlighted growing interest in fixed-income products after reporting that corporate FD rates touched 8.95% in June 2026, with select NBFCs offering higher returns than major banks. 

The platform noted that higher FD participation also increases the importance of accurate tax reporting on interest income. LoansJagat stated, “In June 2026, Corporate FD Rates Reached 8.95% as NBFCs Were More Competitive Than Major Banks.”

What do Tax Experts Recommend? What is the Solution?

Tax professionals recommend reviewing Form 26AS, AIS, and bank interest certificates before filing any revised disclosure. According to tax experts quoted by The Economic Times, taxpayers should not assume that TDS deduction removes the need to declare FD interest because the entire interest amount remains taxable according to the applicable income tax slab.

Experts also advise filing an ITR-U as soon as the omission is identified instead of waiting for a tax notice. Although additional tax applies under the updated return provisions, voluntary correction strengthens compliance and reduces the possibility of future scrutiny by the Income Tax Department.

Conclusion

Taxpayers who missed reporting FD interest in their AY 2025-26 ITR still have a legal route to correct the mistake through ITR-U. Early correction, supported by AIS, Form 26AS and bank records, can help avoid notices, additional disputes and long-term compliance issues.

FAQs

Can I correct my AY 2025-26 ITR if I forgot to report FD interest?

Yes. You can correct the omission by filing an Updated Return (ITR-U), subject to the conditions and timelines under the Income Tax Act. You must pay any additional tax, interest, and applicable charges before filing.

What if my previous year’s ITR is still not processed?

If your earlier ITR is still pending, you should check its status on the Income Tax e-filing portal. A pending return does not stop you from correcting an eligible AY 2025-26 return through the prescribed process.