Guide · India · Fixed deposits
Why the headline FD rate is not your real return
Banks advertise annual interest. Your outcomes depend on your marginal income-tax slab on interest accrual and on inflation between today and maturity.
Model your scenario: FD calculator (post-tax and inflation-adjusted) · optional: RD calculator for monthly savers
Disclaimer: Illustrations use assumptions you choose; they are not predictions of future inflation or tax law.
Interest is generally taxed as income
For typical bank FDs, interest is added to your income and taxed at your slab. A “7%” headline rate can look materially smaller after tax — especially at 30% (plus cess as applicable).
Inflation hits purchasing power
Even if rupees grow on paper, what matters for goals is whether those rupees buy more goods and services. If CPI inflation runs near or above your after-tax yield, real wealth may barely grow or shrink.
TDS is not “final tax”
Banks may deduct TDS when interest crosses thresholds, but your actual liability still depends on total income and slab. Do not confuse TDS credits with the true post-tax return.
What to do with this information
FDs can still be excellent for capital preservation and known horizons — the point is to compare after-tax, after-inflation outcomes when sizing them against PPF, debt funds, or other options.