Falling Interest Rates, Higher Taxes...Are Bank FDs Worth It?

Banks fixed deposits are among the most popular instruments among Indians as they provide fixed-guaranteed return. Though safety of capital and guaranteed returns are the two virtues of bank fixed deposits, tax inefficiency takes the charm away from them. The interest earned on fixed deposits is fully taxable.

Currently, banks are offering an interest of 7 per cent on five-to-ten-year deposits. But with inflation hovering around six per cent, the post-inflation and post-tax return for a person in the highest tax bracket is almost negligible.

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