Taxation on FDs: There are primarily two things one has to be aware of when they are dealing with fixed deposits and taxation. There are two types of taxation that affects the ultimate amount that you are finally left with when you are investing in fixed deposits. There is something called the TDS, which is Tax Deducted at Source. This allows or rather requires the bank to subtract a part of the income that an individual is making through their investment in fixed deposit. The TDS charged on fixed deposits is calculated at 10% as of February, 2016. This means, say if you are making Rs. 10 Lakhs through your fixed deposits in a year, After your TDS is deducted, you will be left with: Rs. 10 lakhs – (10% of Rs. 10 lakhs) = Rs. 9 lakhs. Sounds disheartening already? Wait there is more. You are also accounted for accountable for self-assessment tax which has to be paid from the Rs. 9 lakhs that you just made. So, we are making another assumption that you fall under the 30% tax bracket. This means that your yearly income falls under the bracket where your income is taxed at 30%. This means, you have to deduct that 30% from Rs. 9 lakhs which will calculate something like this: Rs. 9 lakhs – (30% of Rs. 9 lakhs) = Rs. 6.3 lakhs. So, ultimately you made a little more than 3/5^th amount of what you were actually were promised through a fixed deposit. But there is a way to reduce the taxation amount. Simply, make sure you are earning lesser in a year with a longer tenure. There are special tax saving fixed deposit schemes that are available to Indian investors which has a longer tenure but helps save tax.