![]() The interest rate on a fixed deposit, however, typically tends to be less than the rate of inflation in most circumstances. Amit Gupta, MD, SAG Infotech said that this means that you will have to pay taxes on the interest you earn, which will reduce your overall returns.įixed deposit interest falls under the category of "Income from Other Sources." Your tax rate will depend on your income slab rate because the interest on your FD is applied to your overall income before being taxed, said Khandare.Īn investment's return should ideally exceed the rate of inflation, even after taxes are taken into consideration. The interest you earn on a fixed deposit is taxable income. ![]() This means that you cannot access your money until the term has expired, even if you have an emergency. ![]() Once you invest in a fixed deposit, your money is locked in for the term of the deposit.
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