New Delhi, May 21 -- A fixed deposit (FD) may look simple: you put money in the bank, earn guaranteed interest, and collect the maturity amount later. But many investors are caught off guard when the actual amount credited to their account turns out to be lower than expected due to tax deductions.

Suppose you invest Rs.10 lakh in a bank FD offering 7.5% annual interest. At the end of one year, you expect to earn Rs.75,000 as interest. But instead of the full amount, only Rs.67,500 reaches your account. The missing Rs.7,500 has been deducted by the bank as TDS or Tax Deducted at Source. This 10% deduction is not necessarily the final tax on your FD income.

Interest earned on fixed deposits is treated as "Income from Other Sources" under ...