Enter Your Investment Details
Option 1: Taxed Yearly (FD Style)
Interest is taxed each year, and the post-tax amount is reinvested.
Final Amount:
₹0.00
Annualized CAGR:
0.00%
Option 2: Taxed at Redemption (Debt Fund Style)
The entire amount grows for the full tenure. Tax is paid only on the total interest at the end.
Final Amount:
₹0.00
Annualized CAGR:
0.00%
Which Option is Better?
This happens because in the "Taxed at Redemption" scenario, your entire investment (including the gains that would have been taxed away yearly) gets to compound for the full duration, leading to a larger final amount even after paying taxes at the end. This is often called the "power of compounding" with tax deferral.
Year-by-Year Breakdown
| Year | Option 1 (Taxed Yearly) | Option 2 (Growth - Before Tax) | |||
|---|---|---|---|---|---|
| Interest | Tax Paid | End Amount | Interest | End Amount | |
Understanding Your Tax Rate
In India, the tax on interest income is not just the base tax rate. It also includes a surcharge (for higher incomes) and a 4% Health & Education Cess. The default 31.2% represents a common scenario for those in the highest tax bracket with income under ₹50 lakhs.
| Income Bracket | Base Tax | Surcharge | Cess | Effective Tax Rate |
|---|---|---|---|---|
| Under ₹50 lakhs | 30% | 0% | 4% | 31.20% |
| ₹50 lakhs to ₹1 crore | 30% | 10% | 4% | 34.32% |
| ₹1 crore to ₹2 crores | 30% | 15% | 4% | 35.88% |
| ₹2 crores to ₹5 crores | 30% | 25% | 4% | 39.00% |
| Above ₹5 crores | 30% | 37% | 4% | 42.74% |
Note: The 4% cess is calculated on the combined amount of (Base Tax + Surcharge).