Taxation on FD

An outrageous case of taxation.

Those of you who have money in bank Fixed Deposits would probably do well to check of your principle is intact!

My friend, a senior citizen discovered that her Rs 50,000 fixed deposit had suddenly shrunk to Rs 49,xxx. On asking the bank, she was told that it was tax deducted at source.

She pointed out that tax can only be deducted out on income on the deposit and not from the deposit itself.

We learn to our utter horror, that indeed under a Central Board of Direct Taxes (CBDT) circular, banks have been asked to deduct tax in advance per quarter in advance on accural basis.

This means that if it is a new deposit then the banks are simply lopping off your principal.
This is outrageous. I can't see how the government can eat into savings and deplete the principal in the name of collecting advance tax.

This happens only to tax paying citizens in India. What is even more unfair is that most of these deposits are fully tax paid.

We need to make a noise and protest. Do write in your comments to demand correction of this absurd and bizarre decision. Or at least its absurd implementation.

best

Sucheta Dalal,
Consulting Editor, MoneyLIFE Magazine