What does a fixed deposit keep after tax?
A fixed deposit pays the rate on the receipt, and then the interest is part of your income. You pay tax on it at your slab. The rate the bank paints on the wall is the pre-tax rate. Two people with the same deposit can keep different amounts because their slabs differ. TDS, when the bank deducts it, is a withholding. It is not the final tax, and it is not a reason to ignore the interest on your return.
The arithmetic, with your numbers
Write the principal, the annual rate on the receipt, the tenure, and the slab you actually fall in after this interest is added. A rough in-hand rate is the deposit rate reduced by tax at that slab. If the receipt says 7 percent and your slab on this income is 30 percent, the illustration is 7 percent times what remains after 30 percent tax, before cess and before any TDS timing. Cess sits on top of the slab. The post-tax illustration runs that sum on the figures you type. It assumes the tax is paid out of the interest and the rest compounds once a year. Your receipt may compound quarterly. The receipt wins. Do not compare that result with a mutual fund’s last one-year return. The deposit is a contract for a rate. The fund is a market value. For money you need inside three years, the useful comparison is this post-tax deposit against a debt fund’s costs and its tax rule, not against an equity chart. Inflation is not a line on the receipt. If prices rise by more than your post-tax rate, the deposit bought you less than it says. That is a purchasing-power check, not a prediction of next year’s prices.
TDS and the forms
Banks deduct TDS on FD interest once the interest in a year crosses the threshold in the Income-tax Act for that year. The threshold is different for senior citizens, and it has been revised in budgets. Look up the current figure on the income-tax site before you decide you are under it. If your total income is below the taxable limit, Form 15G, or 15H if you are a senior, tells the bank not to deduct TDS. Filing the form does not make taxable interest untaxable. It only stops the deduction when you qualify. If TDS is deducted and your final tax is lower, you claim the difference in the return. If your slab is higher than the TDS rate, you still owe the rest. The Form 26AS or the annual information statement is where the deducted amount should appear.
Who should look at something else
Look elsewhere if you are in a high slab and the post-tax deposit rate does not clear a near-term goal you can fund more simply by keeping cash in the account that will pay the bill. Look elsewhere for money you will not touch for many years and can stand a fall. That money’s problem is not the deposit rate. It is the horizon, which is the same split as SIP or lump sum. Do not break a deposit early without the penalty on the rate. The penalty can wipe the extra you thought a new offer was paying.
Work the numbers
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Questions people ask next
Is a cumulative deposit taxed only at maturity?
The tax is on the interest as it accrues, under the rule for your return, even if the bank pays the cash at the end. A cumulative deposit that shows no credit in the savings account can still be income this year. Check how your return wants that interest reported. Do not wait for maturity to discover five years of unreported interest.
Are company deposits the same sum?
The tax arithmetic is the same idea. The credit risk is not. A company deposit can fail. The bank’s painted rate and a company’s higher rate are not the same product. Read who owes you the money before you chase the extra percent.
Does this include tax-saving fixed deposits?
The post-tax rate is calculated the same way. The lock-in and the deduction, if you are on a regime where the deduction exists, are extra terms. On the new tax regime, a lock-in you accepted only for a deduction can be a lock-in with no deduction. Confirm the regime on your return before you treat the deposit as a tax product.