Fixed deposits () offer predictable returns, but the interest earned is taxable as per the depositor’s applicable income tax slab. Therefore, investors should compare both pre-tax and post-tax returns before choosing a bank or deposit tenure.
According to FundsIndia’s October 2026 report, FD interest rates across large banks vary by tenure, affecting the returns investors retain after tax. Here’s what depositors need to know.
How is FD interest taxed in India?
Interest earned on bank FDs is taxable under “Income from Other Sources” and added to the depositor’s taxable income. The applicable income tax slab determines the final tax liability.
Banks may deduct tax at source (TDS) when interest exceeds the applicable threshold. For bank deposits, the threshold is ₹50,000 in a financial year for non-senior citizens and ₹1 lakh for senior citizens. TDS is generally deducted at 10% when the depositor’s PAN is furnished.
However, TDS is not the final tax liability. Depositors may have to pay additional tax or may be eligible for a refund when filing their income tax return (ITR), depending on their actual tax liability.
What are the FD rates pre- and post-tax across large banks?
The following table compares pre-tax and post-tax FD rates across HDFC Bank, ICICI Bank, State Bank of India (SBI), and Punjab National Bank (PNB) for different tenures.
| FD tenure | Bank | Pre-tax (%) | Post-tax (%) |
| 6 Months | HDFC Bank | 4.25 | 2.97 |
| ICICI Bank | 4.50 | 3.14 | |
| SBI Bank | 5.65 | 3.94 | |
| PNB Bank | 5.60 | 3.90 | |
| 1 Year | HDFC Bank | 6.25 | 4.38 |
| ICICI Bank | 6.25 | 4.38 | |
| SBI Bank | 6.25 | 4.38 | |
| PNB Bank | 6.25 | 4.38 | |
| 2 Years | HDFC Bank | 6.45 | 4.45 |
| ICICI Bank | 6.30 | 4.52 | |
| SBI Bank | 6.40 | 4.45 | |
| PNB Bank | 6.30 | 4.49 | |
| 3 Years | HDFC Bank | 6.45 | 4.60 |
| ICICI Bank | 6.45 | 4.60 | |
| SBI Bank | 6.30 | 4.49 | |
| PNB Bank | 6.30 | 4.49 | |
| 5 Years | HDFC Bank | 6.40 | 4.64 |
| ICICI Bank | 6.50 | 4.72 | |
| SBI Bank | 6.05 | 4.38 | |
| PNB Bank | 6.10 | 4.42 |
Source: FundsIndia October report. FD rates for deposits below ₹3 crore, as of 7 October 2026. Post-tax returns are calculated assuming a 30% tax rate.
Suppose an investor deposits ₹5 lakh in a five-year FD at an annual interest rate of 6.40%. Assuming quarterly compounding, the deposit would grow to approximately ₹6,86,822 at maturity, including ₹1,86,822 in interest before tax.
If the investor falls in the 30% tax slab and earns a post-tax return of 4.64% as given in the table, the interest earned after tax would be around ₹1,29,718, taking the total value to around ₹6,29,718.
This is ₹57,104 lower than the pre-tax maturity value. The figures are illustrative, and actual post-tax returns may vary depending on the investor’s tax liability and the calculation methodology.
Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.