A fixed deposit is a lump sum you leave with a bank for a term you choose. The bank pays the rate on the receipt. That rate does not change when the Reserve Bank moves the repo rate, unlike a repo-linked home loan. At the end you get the principal back, plus interest if you chose a cumulative deposit, or you have already taken the interest along the way if you chose a payout.
Interest is taxed in the year it is credited or paid. It is not taxed only at maturity if the bank credited it earlier. Cumulative deposits still show interest each year on the tax statement even though you did not withdraw it. The deposit itself is not a deduction, unless it is a five-year tax-saving deposit that fits inside section 123, the old section 80C, and you are not in the new regime.
Section 393 (this was section 194A) lets the bank deduct 10% when interest it credits in the year crosses ₹50,000, or ₹1 lakh if you are 60 or older. TDS is a collection. Your slab, plus 4% cess, is the tax. A person inside the section 156 rebate may be due a refund of the TDS. A person in the 30% band will owe more than 10%.
Section 153 (this was section 80TTB for a senior, and section 80TTA for savings-account interest) can shelter some interest, but not in the new regime. The FD calculator does not apply section 153, because the rest of your interest, and the regime, are unknown. It shows the slab you type, plus cess.
A worked example
₹1,00,000 at 6.25% for one year, compounded quarterly, cumulative. The FD engine’s interest is ₹6,398. The maturity value is ₹1,06,398. At a 30% slab, tax including cess is ₹1,996. What you keep, if that is the whole story, is ₹1,04,402.
6.25% is one bank’s card, not a market average. SBI’s page is the source, in force from 15 December 2025. A senior citizen’s extra on that card is not added automatically. Type the rate from your own receipt. Compare the post-tax result with PPF, where ₹1,50,000 a year at 7.1% is a different product with a tax-free maturity, on the FD calculator and the PPF calculator. The guide puts the three side by side.
Mistakes people make
- Treating 10% TDS as the final tax.
- Ignoring interest below ₹50,000. The bank’s silence is not an exemption.
- Comparing a pre-tax FD rate with PPF’s 7.1% and declaring a winner.
- Assuming the rate resets when the repo rate moves. The receipt is the rate.
- Claiming section 153 in the new regime.
The section
Interest TDS is section 393 (this was section 194A). A five-year tax-saving deposit, if you claim it, is section 123 (this was section 80C). The senior interest deduction is section 153 (this was section 80TTB), and section 202 does not allow it.
Questions
Is FD interest tax-free?
No. On ₹1,00,000 at 6.25% for one year, quarterly compounding, interest is ₹6,398. At a 30% slab plus cess the tax is ₹1,996. A senior citizen’s old-regime deduction under section 153 can cover some interest. Section 202 does not allow section 153.
Is TDS the tax I owe?
A bank may deduct 10% when interest it credits crosses ₹50,000, or ₹1 lakh if you are 60 or older. That is section 393. Ten percent of the example’s interest is less than the ₹1,996 slab bill. You settle the difference on the return.
Is the example rate everyone’s rate?
No. 6.25% is SBI’s retail card for 1 year to less than 2 years, below ₹3 crore, general public, in force from 15 December 2025. Your receipt can differ. The calculator uses the rate you type.
Sources
Figures checked 28 Oct 2026.