Discrepancy in FD Maturity Payout from IndusInd Bank – A Case to Review

[desiviru]

I am puzzled! How does the bank benefit when rather than paying interest to the depositor (in the form of compounded interest) they are paying that amount instead to the Government every quarter? Yes, they don't have to pay further interest on that amount, but they don't have that money with the bank anymore to lend out either. It's like they don't have to pay interest on money that wasn't deposited with them!

The only benefit they have is having use of free money from the time of deduction from the depositor's account to the time they actually pay the money to the Government. It can be looked at this way also that that's a benefit they have at a cost to the Government who receive delayed tax.
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Had the Govt not asked for TDS on FD, banks would be paying more money out of their pockets,. What's confusing in that is beyond my understanding?

If you had to pay me Rs.10 for a Rs.100 I despoited but due to TDS you are finally paying Rs.9.50 who is saving this Rs.0.50? 1 ka TDS Govt ko chala gaya. Mujhe 9 ki bajay Rs.8.50 mila aur Rs.1 ka refund le liya. Mere pass 10 ki jagah 9.50 aaya.

TDS toh de diya bank ne Govt ko us TDS ki wajah se jo apna outflow interest ka kamm huya uska benefit customer ya Govt ko thodi jaa raha hai.

 

[psmangat5]

No brother

I am puzzled! How does the bank benefit when rather than paying interest to the depositor (in the form of compounded interest) they are paying that amount instead to the Government every quarter? Yes, they don't have to pay further interest on that amount, but they don't have that money with the bank anymore to lend out either. It's like they don't have to pay interest on money that wasn't deposited with them!

The only benefit they have is having use of free money from the time of deduction from the depositor's account to the time they actually pay the money to the Government. It can be looked at this way also that that's a benefit they have at a cost to the Government who receive delayed tax.
.

No brother once the tax is transferred in TDS account banks can't use it. So they don't have free money to use. Government is most clever customer.

 

[desiviru]

@dvader @Trust Me If you have time, you continue to bang your head with him as he continuously replying without even understanding the context we are talking about here.

I am done in this topic now. 🙂

 

[KGSIPO]

Following the hot discussion with lot of confusion 😴

 

[Trust Me]

No brother once the tax is transferred in TDS account banks can't use it. So they don't have free money to use. Government is most clever customer.

Huh?! Who said anything about free money after TDS is transferred to the Government?

Banks have use of free money from the time TDS is done (so no compounding, and consequently, no further interest payment on this amount) to the time the TDS is actually transferred to the Government at a later date.
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[Trust Me]

Had the Govt not asked for TDS on FD, banks would be paying more money out of their pockets,. What's confusing in that is beyond my understanding?

What is confusing is this:

Yes, banks would pay more money in absence of TDS, -- but that additional money would be due to the interest on the 'TDS' amount that was not needed to be transferred, so banks had full use of that money, just like any other deposit.

With TDS, that money goes to the Government, and is no more there with the bank as a part of a deposit that can be lent out, earning money for the bank to pay interest from. So, of course banks don't have to pay interest on the money they don't have with them anymore.

It beats me how that can be construed as beneficial to the banks. They didn't pay interest on the money they didn't have with them as deposit anymore. As simple as that!
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[NABNAB is verified member.]

Yes, it's necessary to check every interest credit and calculation manually for many banks nowadays. Have heard similar for the IDFC as well.

 

[Arnal07]

If you had to pay me Rs.10 for a Rs.100 I despoited but due to TDS you are finally paying Rs.9.50 who is saving this Rs.0.50? 1 ka TDS Govt ko chala gaya. Mujhe 9 ki bajay Rs.8.50 mila aur Rs.1 ka refund le liya. Mere pass 10 ki jagah 9.50 aaya.

Plz explain this calculation with details. How 0.50rs is going away???????

 

[hender]

Hey everyone,

Here’s a recent issue I faced with IndusInd Bank while redeeming one of my Fixed Deposits — sharing this so others can stay alert and double-check when their FDs mature.

🔹 I had an FD of ₹1,00,000 which matured today. Based on the interest rate, the expected maturity amount was ₹1,12,370.
🔹 However, only ₹1,08,880 was credited to my savings account
Upon checking the closed FD statement, I noticed:

• ₹1,10,245 was debited from the FD
• So there's a shortfall of ₹1,365 between the FD debit and the actual credit
• Additionally, ₹2,125 was deducted (on ₹12,370 interest), which is higher than the standard 10% TDS — despite my PAN being linked

I haven't submitted Form 15G, and my total interest income for the current financial year is around ₹51,000 (including this FD).

My RM couldn’t explain the deductions clearly and mentioned that no TDS was shown on their end — and advised me to escalate the issue to the Nodal Desk. I’m currently doing that.
What could be the reason for this? Is this an error, or am I missing something?
Has anyone else faced something similar? Would love to hear about your experience.

@cardio_guy @SSV @Anindya98 @NAB @sjmajumder @newmakerhere @hender @BVC @CosmicCat @BeingIncog @Beyond @helloworld

@Fini7777 — I don’t have much to add to this thread, as others have already shared some excellent insights. But I’d like to highlight one recurring issue: many banks’ Core Banking Systems (CBS) still seem buggy or inconsistently implemented when it comes to handling TDS.

Take my recent experience with SBI as an example (You should specifically read the yesterday's amendment to that post). Although my dad had submitted Form 15H for all his SCSS (Senior Citizens’ Savings Scheme) deposits for the financial year in April 2024, they failed to honour it for one particular quarter (Oct-Dec '24). During that period, a short-term FD of ₹50,000 was opened by him in October '24 for 3 months, but no separate Form 15H was submitted specifically for it. (He had held no other FDs with them during that financial year.)

However, upon its maturity, they deducted ₹70 as 10% TDS on the ₹699 interest earned from it, since Form 15H wasn’t submitted for it separately, and it was also fair for them to do so. However, what’s baffling is that the bank also deducted an additional ₹4,900 as TDS on the SCSS interest income (Nearly ₹49,000) for that same quarter, despite valid Form 15H being already in place for those SCSS deposits. This effectively meant a 10% deduction on SCSS interest, which shouldn't have happened, and led to a significant dip in the principal credited. Essentially, he received around ₹5,000 less than the principal amount. However, they didn't deduct any TDS for the Jan-Mar '25 quarter—indicating it was a technical issue at their end.

Personally, experiences like these are why I’ve always felt more comfortable keeping emergency funds in Debt Mutual Funds rather than FDs. While they don’t offer the same instant liquidity, they give you better control over taxation and avoid surprises like this.

If you still prefer FDs for emergency funds, a good practice is to split them across multiple banks in such a way that in no bank the total interest income across all the FDs combined exceeds ₹50,000. Or rather submit Form 15G if you feel that no TDS should be deducted from your account if you would be having a total interest income below the basic exemption limit of ₹2,50,000 (Under old regime) or ₹4,00,000 (Under new regime).

I have FDs only in Canara Bank and they don't operate in this manner. They credit interest quarterly to the FD account and debit 10% TDS against each interest credit to the same FD account and also gives a statement if asked for which clarifies all credits and debits.

Faulty system, poor design. The closing procedure should have a validation process to ensure all formalities, like interest credit till date, TDS, etc. are successfully posted before closing the FD. If not, it should be able to run adhoc commands to complete formalities before closing the FD.

Definitely not.

@RAMESH BABU N , Sir - share your experience and view's on the matter.

Dear @Fini7777 @CosmicCat as
@sjmajumder already mentioned.

Had a word with a Senior Sir, Taking too much pain unnecessary is nothing worth of. He shared a situation - where is the real impact-

"Now think 🤔 about those purely living on Bank Interest Income, it was a sharp 30% reduction in Corona times from 7% range to 5% range, ex- 70 Lakhs of FD (INT 5 LK reduced to 3.5 LK)"
(TDS still in force)

 

[RAMESH BABU N]

@RAMESH BABU N , Sir - share your experience and view's on the matter.

RoI on FDs and TDS rates are known well before the actual TDS process kicks in. So, there is NO CONFUSION or DOUBT on the way calculations are carried out.

Those who never studied banking processes or rules governing FDs, TDS, TCS.... or who doesn't have any idea in these matters.... Will take these issues with a pinch of salt. Admitting ignorance is difficult for many - especially those with nothing more than Engineering/Systems/Marketing backgrounds.

Because of the huge knowledge gaps, for such guys everything is dicey n everything is unpredictable.

In fact, everything is clearly defined forehand n verifiable.

If any excess or shortage is there, the same is taken care of - in future - either thru filing ITRs or by banks.

Better avoid discussing such topics with nil or near-nil knowledge in these matters.

 

[hender]

RoI on FDs and TDS rates are known well before the actual TDS process kicks in. So, there is NO CONFUSION or DOUBT on the way calculations are carried out.

Those who never studied banking processes or rules governing FDs, TDS, TCS.... or who doesn't have any idea in these matters.... Will take these issues with a pinch of salt. Admitting ignorance is difficult for many - especially those with nothing more than Engineering/Systems/Marketing backgrounds.

Because of the huge knowledge gaps, for such guys everything is dicey n everything is unpredictable.

In fact, everything is clearly defined forehand n verifiable.

If any excess or shortage is there, the same is taken care of - in future - either thru filing ITRs or by banks.

Better avoid discussing such topics with nil or near-nil knowledge in these matters.

Thanks Sir, That's why I bothered you...🙏