Yes, the interest earned on bank fixed deposit is taxable under the Income Tax Act, 1961.
The tax is deducted at source by the bank as per the prevailing rules. The rate for TDS (Tax Deduction at Source) is 10%, if PAN is furnished; and if not, TDS is 20%. No surcharge or cess is levied over and
above this basic rate.
TDS, with respect to interest earned on your bank FD, is deducted based on the total interest projected on the aggregate of your bank FD for the financial year.
If the total projected interest in a financial year crosses the threshold limit, which is currently Rs 10,000 for non-senior citizens, TDS is deducted proportionately from the existing fixed deposits at the
time of interest application. For senior citizens (60 years and above), the union budget 2018 has increased the exemption of interest income on deposits with banks (includes fixed deposits) and post offices
from Rs 10,000 to Rs 50,000.