Zero Balance Threshold

Zero Balance Threshold – The zero balance threshold refers to a minimum account balance or income level below which certain deductions, charges, or taxes do not apply. It is used by banks and tax authorities to exempt small accounts or low-value incomes from TDS (Tax Deducted at Source) or service charges, reducing the compliance burden on small depositors or taxpayers. Under income tax rules, thresholds are specified to prevent unnecessary TDS on nominal earnings: Savings account interest below ₹40,000 (₹50,000 for senior citizens) is exempt from TDS. Fixed Deposits (FDs) with interest below the threshold do not attract TDS.

Example: A fixed deposit generates ₹35,000 interest in a year. Since it is below the ₹40,000 threshold, no TDS is deducted by the bank.