Why Your FDR Interest Is Lower Than You Think

The bank says 8 percent. The slip you get at maturity says something smaller. And by the time you go to the bazaar, the money buys less than it did a year ago. Here is where the gap comes from, worked out on one real Tk 5 lakh deposit.

Ask almost any salaried family in Dhaka where their savings sit, and the answer is an FDR. It feels safe, the rate is printed on a sheet, and you do not have to watch it every day. That is all true. But the rate on the sheet is the start of the story, not the end.

Three things eat into it before the money reaches you, and a fourth eats into what the money can buy. The first is source tax on the interest. The second is the yearly excise duty on your account balance. The third is that you lose a little more if you do not have proof of a tax return. The fourth is inflation.

None of this is hidden. It is all in the rules. It is just rarely added up in one place, on one number. So that is what we do here.

One real number: Tk 5 lakh for one year at 8%

We picked a rate you can actually get today. Midland Bank’s published deposit sheet, effective 8 October 2026, shows 8% for a one-year FDR. Bank Asia’s sheet shows 7.25% for the same tenure. We use Midland’s rate for the main example and come back to Bank Asia’s later.

Say you put Tk 5,00,000 in a one-year FDR at 8%. Here is what happens, step by step, if you have submitted your tax return and can show proof of it.

Step	What happens	Amount (Tk)
1	Interest the bank promises (5,00,000 × 8%)	40,000
2	Source tax at 10%, cut by the bank	− 4,000
3	Interest actually credited	36,000
4	Balance at maturity (5,00,000 + 36,000)	5,36,000
5	Excise duty, because the balance went above Tk 5 lakh	− 500
6	What you really earned	35,500

So the 8% on the sheet becomes 7.1% in your hand. That is before inflation. We will get to inflation in a moment, and that is where the number turns ugly.

If you have not got proof of a tax return, the source tax is 15% instead of 10%. The bank cuts Tk 6,000 instead of Tk 4,000, and you end up with Tk 33,500, or 6.7%.

A quick note on our method. We kept the example simple: one deposit, one year, interest paid at maturity, no early withdrawal. Banks differ slightly in when they deduct excise duty and how they round. Your own slip may be off by a few taka. The size of the gap will not change.

Source tax: 10% or 15%, and why the difference matters

When your FDR earns interest, the bank does not pay you all of it. It keeps a slice and sends it to the government as advance income tax. This is called tax deducted at source, or source tax.

The rate depends on one piece of paper. If you have submitted your income tax return and can give the bank proof of submission of return (PSR), the rate is 10%. If you cannot, the rate is 15%.

On our Tk 5 lakh example, that is the difference between losing Tk 4,000 and losing Tk 6,000. Two thousand taka a year, just for a document many people already have but never hand to the bank.

Two things people often miss:

• Source tax is not always the final tax. It is an advance. When you file your return, the interest counts as income. If your total tax comes to less than what was cut, you can adjust it. If it comes to more, you pay the rest.
• The bank does not know you filed unless you tell it. Filing your return online is not enough. You usually have to submit the PSR or acknowledgement slip to your branch, or upload it in the bank’s app if it allows that. Ask the branch to update your account before the next interest date.

If you are a salaried person with a TIN, you probably file a return already. Taking the PSR to the bank is one of the easiest ways to get a slightly better return without changing anything else.

Excise duty: the small yearly charge on your balance

Excise duty is a fixed government charge on bank accounts. Banks deduct it once a year, based on the highest balance the account touched at any point during that year. It applies to savings accounts and FDRs alike. It has nothing to do with how much interest you earned.

The FY2026-27 budget raised the amount you can keep without paying any excise duty from Tk 3 lakh to Tk 4 lakh. That was a real relief for small savers. Above that, the duty climbs in steps. The figures below are the commonly reported slabs for personal accounts; check your bank’s current schedule for the exact rule it applies.

Highest balance during the year	Excise duty (Tk)
Up to Tk 4 lakh	0
Above Tk 4 lakh, up to Tk 5 lakh	150
Above Tk 5 lakh, up to Tk 10 lakh	500
Above Tk 10 lakh, up to Tk 50 lakh	3,000
Above Tk 50 lakh, up to Tk 1 crore	5,000
Above Tk 1 crore, up to Tk 2 crore	10,000
Above Tk 2 crore, up to Tk 5 crore	20,000
Above Tk 5 crore	50,000

Here is the trap in our example. You deposited exactly Tk 5 lakh, which on its own sits in the Tk 150 slab. But when the bank credits your interest at maturity, the balance becomes Tk 5,36,000. That pushes it into the Tk 500 slab.

Tk 500 on a Tk 5 lakh deposit sounds tiny, and it is: about 0.1% of your money. But it comes off a return that is already thin, and as you will see next, every bit counts when the real return is below zero.

The duty is charged per account. So two separate FDRs of Tk 2.5 lakh each would each stay under Tk 4 lakh, and neither would pay any excise duty at all. That is legal and common. We come back to it in the tips below.

Inflation: the cost you never see on the slip

Tax and excise duty come off your money. Inflation comes off what your money can buy. It never appears on a bank statement, but it is the biggest of the four.

The Bangladesh Bureau of Statistics put point-to-point inflation at 8.34% in September 2026. In plain words: something that cost Tk 100 a year ago costs about Tk 108.34 now.

So to buy the same basket of goods next year that Tk 5 lakh buys today, you would need about Tk 5,41,700. Your FDR, after tax and duty, gives you Tk 5,35,500. You are about Tk 6,200 short.

That is the real return: roughly minus 1.1%. Your money grew in taka, but it shrank in what it can buy.

Here is the full picture for both banks and both tax rates, using the same Tk 5 lakh and the same 8.34% inflation figure.

Rate and tax	Net earned (Tk)	Return in hand	Real return after inflation	Short of inflation by (Tk)
8%, with PSR (10% tax)	35,500	7.10%	about −1.1%	6,200
8%, no PSR (15% tax)	33,500	6.70%	about −1.5%	8,200
7.25%, with PSR (10% tax)	32,125	6.43%	about −1.8%	9,575
7.25%, no PSR (15% tax)	30,313	6.06%	about −2.1%	11,388

Real return calculated as (1 + return in hand) ÷ (1 + inflation) − 1. Figures are our calculation from published rates; inflation will change month to month.

Two honest caveats. First, 8.34% is a national average. Your own household inflation could be higher or lower, depending on what you spend on. Rent and school fees in Dhaka do not always follow the national number. Second, inflation is not fixed. Bangladesh Bank cut its policy rate to 9.5% in August 2026, which suggests it expects price pressure to ease. If inflation falls to, say, 6%, the same 8% FDR would start giving a small positive real return again.

But right now, on today’s numbers, a typical FDR is not quite keeping pace with prices.

So is an FDR a bad idea?

No. An FDR still does a job nothing else does as simply. Your principal is safe from market swings, deposits are covered by the government’s deposit protection scheme up to Tk 2 lakh per depositor per bank, and you know exactly what you will get. For an emergency fund or money you need in a year or two, that certainty is worth a lot.

The point is not to stop using FDRs. The point is to stop thinking of 8% as 8%, and to keep what you legally can.

How to keep more of your FDR interest

1. Give the bank your PSR. This alone moves you from 15% to 10% source tax. On Tk 5 lakh at 8%, that is Tk 2,000 a year.
2. Watch the Tk 4 lakh and Tk 5 lakh lines. Remember the interest gets added to your balance. A deposit of Tk 4.6 lakh at 8% would end around Tk 4.93 lakh after tax, staying in the Tk 150 slab instead of Tk 500.
3. Split large amounts across accounts. Excise duty is charged per account. Two FDRs of Tk 2.5 lakh pay no duty; one of Tk 5 lakh pays Tk 500. Splitting across two banks also keeps each one inside the Tk 2 lakh deposit protection limit more easily.
4. Compare rates, not brands. On our example, 8% versus 7.25% is a gap of over Tk 3,000 a year. Rate sheets are public on every bank’s website. Check the bank’s financial health too, not just the rate.
5. Do not break an FDR early if you can avoid it. Early encashment usually pays a much lower rate, which can wipe out most of the gain.
6. Keep only what you need in FDRs. For money you will not touch for five years or more, it is worth reading about other options. Our guide on where to keep your first 1 lakh taka compares savings accounts, DPS, Sanchayapatra, mutual funds and gold side by side.

This article explains how charges work using published rates. It is not personal financial or tax advice. Rates, tax rules and slabs change; confirm the current figures with your bank or a tax adviser before you decide.

Frequently asked questions

Why did I get less interest than my FDR rate?

Because the bank cuts source tax (10% with proof of tax return, 15% without) from the interest, and the yearly excise duty comes off your balance. On Tk 5 lakh at 8%, the Tk 40,000 promised becomes about Tk 35,500.

How do I pay 10% tax instead of 15% on FDR interest?

Submit your income tax return and give your bank the proof of submission of return (PSR). The bank will then apply 10%.

Is there excise duty on an FDR below Tk 4 lakh?

No. From FY2026-27, accounts whose highest balance during the year stays at or below Tk 4 lakh pay no excise duty.

Is the source tax my final tax?

Not always. It is advance tax. Your interest is counted as income in your return, and the tax already cut is adjusted against what you owe.

Is my FDR beating inflation?

On September 2026 numbers, mostly no. With 8.34% inflation, even an 8% FDR gives a real return of about minus 1.1% after tax and duty.

Key words explained

Term	What it means
FDR	Fixed Deposit Receipt. You lock money with a bank for a set time at a set rate.
Source tax	Tax the bank cuts from your interest before paying you, and sends to the government.
PSR	Proof of Submission of Return. Shows you filed your income tax return.
Excise duty	A fixed yearly government charge based on the highest balance in an account.
Inflation	How fast prices are rising. 8% inflation means Tk 100 of goods now costs Tk 108.
Real return	What your money gained after adjusting for inflation. Can be negative.
Deposit protection	Government-backed cover that repays depositors up to a limit if a bank fails.

How we reported this

We took one-year FDR rates from the published rate sheets of Midland Bank and Bank Asia as of October 2026. Source tax rates and the FY2026-27 excise duty exemption come from budget coverage in national newspapers; the higher excise slabs are as reported in earlier budget coverage, and we found no reported change to them. Inflation is the Bangladesh Bureau of Statistics figure for September 2026, as reported by the press. Every calculation was run in a short script and rounded to the nearest taka. We did not take payment from any bank mentioned here.