Interest is fully taxable

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All income needs to be reported, whether exempt from income tax or not. Interest earned on bank accounts (savings and FD) are generally not reported due to misconception. Interest income, including accrued interest on NSC is taxable. Money received due to compulsory acquisition of land is also taxable. Even the rent received from cell phone tower on roof of your house is taxable! Long term Capital gain on stocks and mutual funds is not taxable, but still needs to be reported under exempt income in ITR2 form. TDS is deducted on your estimated income at rates specified by the Income Tax Department. However, your actual income may be higher or lower. Therefore, you have to compute your tax liability at the end of the financial year. Depending on your income and TDS deducted, you may have to pay more taxes or you may be eligible for refund. In case you have refund due from income tax, do not forget to mention bank details in your Income Tax Return. Returns after taxes are not good to beat the inflation, hence there is a negative growth in your money. For example the actual/average inflation rate is 10% and F D interest after tax is 6% than your money has negative growth of 4%. Direct tax code has excluded these tax saving investments. Now, superannuation funds, provident funds and pension funds are allowed for deduction.