Post-tax FD return by slab
FD interest is added to your income and taxed at your marginal slab rate. Headline rate × (1 − slab) = what actually lands in your account.
| Slab | Effective tax | 7% FD post-tax | 7.5% post-tax | 8% post-tax |
|---|---|---|---|---|
| 0% (87A rebate) | 0% | 7.00% | 7.50% | 8.00% |
| 5% | 5% | 6.65% | 7.13% | 7.60% |
| 10% | 10% | 6.30% | 6.75% | 7.20% |
| 20% | 20% | 5.60% | 6.00% | 6.40% |
| 30% | 30% | 4.90% | 5.25% | 5.60% |
Cess of 4% on tax pushes the 30% slab to an effective 31.2% — so a 7% FD is closer to 4.82% in practice. Surcharge above ₹50L taxable income makes it worse.
Why FD interest is taxed at slab
FD interest is "income from other sources" under the Income Tax Act, so it's taxed at your marginal slab — not a flat rate. That's structurally different from equity LTCG (12.5% above ₹1.25L exempt per year, after the July 2024 change) and debt mutual fund LTCG, which since April 2023 is taxed at slab with no indexation. So FDs and debt MFs are now taxed identically on return — but FDs lose to PPF (7.1%, fully tax-free) and equity over long horizons.
Common mistakes
- Comparing a 7% FD with an 8% debt MF on headline rates — both are slab-taxed now, so adjust before deciding.
- Forgetting senior citizens get +0.5% rate and a ₹50,000 80TTB deduction on interest (Old regime).
- Splitting FDs across banks to dodge the ₹40,000 TDS threshold (₹50,000 for seniors) — the income is still taxable on return, you just delay the deduction.
- Choosing FD over PPF for long-horizon goals — PPF at 7.1% is fully tax-free, beating every FD post-tax for anyone in the 10% slab or higher.
Updated May 26, 2026. Rates and rules current as of May 2026 — FY 2025-26 (AY 2026-27). Equity LTCG 12.5% per Finance Act 2024. Rules may change in the next Union Budget.