Fixed deposit questions
Senior-citizen rates, TDS, deposit insurance and what premature withdrawal actually costs.
How is FD interest taxed?
Interest is added to income and taxed at your slab rate in the year it accrues. Banks deduct 10% TDS once interest crosses Rs 40,000 in a year (Rs 50,000 for senior citizens).
What do I lose by breaking an FD early?
Interest is recalculated at the card rate for the period actually completed, and most banks additionally deduct a penalty of 0.5% to 1%.
How much of my deposit is insured?
DICGC insures up to Rs 5 lakh per depositor per bank, covering principal and interest across all branches of that bank.
Do senior citizens get higher rates?
Yes, typically 25 to 75 basis points more than the regular card rate, and some banks run special longer-tenure schemes for depositors above 60 or 80.
Are corporate FDs comparable to bank FDs?
They pay more but carry issuer credit risk and no DICGC cover. Restrict them to AAA-rated issuers and treat the extra yield as compensation for that risk.
What is a tax-saving FD?
A five-year deposit eligible for Section 80C deduction under the old tax regime. It cannot be withdrawn or pledged during the lock-in, and the interest remains fully taxable.