Tax on Bank tax saving deposit

Hi, Tax Saving Bank Deposits fall under the category of ETE (Exempt - Tax - Exempt). Read : http://www.relakhs.com/tax-treatment-taxation-rules-investments-eee-eet/ The interest earned from tax saver fixed deposits is taxable. The interest income that is generated from such FDs is subject to the same tax rules as any other regular FD. Banks deduct TDS on interest as and when interest is accrued, not when interest is paid out. This TDS deducted reflects in your Form 26AS automatically. Hence to prevent confusion in Form 26AS, it is advisable to pay the self assessment tax on your interest income (if applicable) on a yearly basis, and not when the FD matures. Read : http://www.relakhs.com/recurring-deposit-taxes-bank-fd-rd-interest-itr/ Also, there's another compelling argument in favour of yearly tax payments on interest income. When you declare interest income as a lump sum amount when your FD matures, there is a possibility that you may fall under higher tax slab in future and pay higher taxes overall. To prevent this, it is advisable to simply pay the tax accrued on your interest income on an annual basis.