Money Basics · Banks, FDs & savings

FD tax

The bank poster says 7.5%. If you earn well, your real FD return can be under 5.3%, and after inflation, close to zero. Here's the math nobody shows you.

FD interest is taxed at your slab rate

Unlike stocks or equity funds (which get special lower rates), FD interest is added to your income and taxed like salary. In the 30% bracket, a 7.5% FD actually pays you 5.25%. If inflation is 5%, your 'safe' investment earns you 0.25% real return. That's not growing wealth. That's preserving it, barely.

7.5%the poster rate

5.25%after 30% slab tax

~0.25%after 5% inflation

TDS. Tax cut before you even see it

If your FD interest across a bank crosses ₹50,000 in a year, the bank deducts 10% TDS automatically. Two things to know:

1. TDS is not the full tax, if you're in the 30% slab, you owe the remaining 20% at ITR time.

2. If your total income is below the taxable limit (student with an FD, for example), submit Form 121 to the bank and they won't cut TDS at all. It replaced Forms 15G and 15H on 1 April 2026, and an old declaration does not carry forward. You file a fresh one each tax year.

> Interest is taxable every year even if you chose 'payout at maturity' and haven't received a rupee yet. Declaring it yearly (accrual) avoids a nasty final-year tax pile-up.

So are FDs bad?

No. They're for SAFETY, not growth: emergency funds, money needed within 2-3 years, sleeping well. Just never confuse the poster rate with your real, post-tax, post-inflation return.

Which makes every extra percent on that poster rate worth chasing. Some licensed banks pay 1-1.5% more than the household names, and the reason why is not the one people assume.

Takeaway. FD interest is taxed at your full slab rate. A 7.5% FD is ~5.25% post-tax in the 30% bracket. FDs are for safety, not wealth-building.