FD rates are expected to rise

With the Reserve Bank of India hiking repo rates by 140 basis points (1.4 per cent) to tame inflation this year, several lenders have serially raised their fixed deposit (FD) interest rate by 50 to 60 basis points (0.50 per cent to 0.60 per cent) in recent weeks. While the State Bank of India is offering 6.1 per cent returns - and an additional 0.50 per cent for senior citizens - on their Utsav Deposit Scheme, HDFC Bank has raised their 5- to 10-year FD rates to 5.75 per cent. Does this mean FD has become an attractive investment option? We don't think so. That's because the interest you'll earn on your fixed deposit will be taxable. Here's how your returns will be taxed: The interest you earn each year will be added to your annual income. Only after your total income is added up will your tax slab be determined. So, if you fall in the highest tax bracket, your interest income would be taxed at a whopping 30 per cent. This is why we believe there are two options better than FD. Option 1: National Savings Certificate (NSC) National Sav