Now, even your fixed deposit principal may be at risk

Fixed deposit holders should watch out. Banks may be snatching a part of the principal under the garb of deducting tax at source

Would you think twice before investing in a fixed deposit? The obvious answer would be a resounding ‘no’. But what if a bank is nibbling away at your principal in the name of deducting tax at source on your interest earnings?

It is unthinkable, right? Not quite. It appears that banks have found a way to tamper with the principal of your fixed deposits too. Here is the case of a senior colleague at Moneylife.

One fine day, she suddenly discovered that her fixed deposit of Rs50,000 in HDFC Bank was appearing in the statement as Rs49,934. Assuming it was a mistake, she wrote to the bank and was in for a shock.

She was told that while the bank has a policy of not recovering tax until the interest accrued crosses the taxable threshold of Rs10,000, in her case, this threshold was crossed when the interest on the FD of Rs1,028 was credited to her account. Her total interest was Rs10,607 which meant that the bank had to deduct tax at 10.2% on Rs10,607 which came to Rs1,081. The figure fell short after adjusting the entire interest of Rs1,028. So the bank coolly decided to dip into her principal, knowing fully well that it has no right to do so. Simply put, this means that the bank is eating into the savings and eating up the principal under the garb of collecting advance tax.

This was done despite the fact that she has a savings account with the bank. Neither was her savings account used to cover the amount nor was she asked to deposit the amount. The bank made no attempts whatsoever to inform her of their intentions to adjust her principal.

What is even more alarming is that this lady is a ‘privileged customer’ of HDFC Bank. If priority customers are at the receiving end of such shocking practices, one can only imagine the plight of ordinary customers.

Banks can only deduct tax on the interest amount and have no business deducting from the principal. When asked why the bank lopped off the principal, a bank executive gave this breezy reply: "There is an old CBDT (Central Board of Direct Taxes) clarification on this issue, but irrespective of the clarification, this (recovery from principal) is the option which has the least issues. Hence (the) Bank has, as a policy, decided on recovering from principal if the interest is not sufficient.” 

We have learnt to our utter horror that, indeed, under a CBDT circular, banks have been asked to deduct tax in advance per quarter on accrual basis. This is outrageous, considering that most of these deposits are fully tax-paid savings.
This issue has been raised before the Reserve Bank of India, which has sought comments from HDFC Bank.

Fixed deposits are the only investment avenue people don’t think twice about before investing. They are considered to be the safest form of investment that at least ensures that your tax-paid principal amount, usually your hard-earned savings or retirement kitty, is safe. That may no longer hold true.

Another senior citizen had a similar complaint about his cumulative FD. In his case, Bank of India deducted TDS amounting to Rs16,000 from the maturity value of his deposit. He was also not sent a TDS certificate. “First, they don’t inform people beforehand and start deducting TDS from day one. Most nationalised banks and even some private banks don’t send TDS certificate home.
For senior citizens, this is a big hassle. This is a huge lacuna which needs to be addressed,” he said. Commenting on this issue, Sheilu Sreenivasan, founder, Dignity Foundation said, “A fixed deposit is the most popular vehicle of investment among senior citizens. They trust FDs like no other instrument. This is absolute loot.”

VG Patel, trustee, Consumer Education and Research Centre (CERC) said, “No one should touch my deposit without prior intimation and authorisation. It is my savings and I put it in a bank for safe keeping. We take one step forward and two backwards in the process of freeing us from the clutches of ancient and arrogant rules, procedures and the civil servants.”




6 years ago

Your TDS dept should be sacked for deducting TDS even after submission of FORM 15 G. I want Mr. Kini to be shunted out. KIndly refund the amounts or else I lodge a police complaint. I will prove it is done with criminal intent


6 years ago

Indeed banks are looting away hard earned white money of oridnary citizens. Whichs thus points to the fact as to why people prefer hoarding black money in India. The CBDT does not offer a fair deal to the common man.

Prabha Krishnan

7 years ago

Dear Sucheta and team,
I had this experience in SBI personal Banking branch, Ventura Building, Hiranandani Gardens, Mumbai.
My FDs of Rs. 1 lac each matured on 31 March. I asked that the principal plus interest accrued be credited to my SB a/c in the same bank. For each FD only Rs 99998/- was credited. When I asked why, the staff claimed that the "system" would not allow the whole amount to be credited, even though I asked that TDS be deducted from the interest accrued. They also pretended to be surprised, though given the number of depositers, mine cannot have been the first case to have come to their notice.I have to travel by auto to this branch, which costs me Rs.32/ each trip. The branch across the road will charge me Rs. 10/ each time they update my pass book. I'm a senior, widowed, living on my savings. Surely the sacred "system" can treat me better?
Can Moneylife team help organise the thousands of such victims to challenge these banks? I agree with Praful Vora's comment that banks are hitting back at customers.


7 years ago

At every stage, everyone tries to plunder n grab from poor. This is rampant thuggery by administration from Central Govt to Gram Panchayat.

Krishna Gopal Gupta

7 years ago

I had experienced recently that the amount of FD paid to me on maturity and TDS amount deducted on it does not match with the maturity amount of FD. On asking, I was told that the interest earnest on TDS paid to Govt. will not accrue to you and thereby it has been deducted. The answer didn't satisfy me at all.

Avinash Murkute

7 years ago

Thank you for informative article. Indeed it is loot and I have long back written about e-dacoits of India named HDFC bank. One thing I would like to bring forth - whatever law they apply, whatever circular they rely on, if they fail to issue TDS certificate, complaint shall lie with Commissioner of Income Tax for refusing to issue TDS certificate. And lack of intimation can be deemed as refusal to issue TDS. Time to find out how per day fine needs to levied on such defaulters like HDFC bank.

Hari Lakhera

7 years ago



7 years ago




7 years ago

do look this thru and let me know what you think

tejas shah

7 years ago

Banks and the staff are at times the most idiotic ppl we have ever met. Fortunately since this lady was a TEAM MEMBER so her story has come here. there are hundreds of stories daily in bombay like this... how does one get them to u ???


7 years ago

exactly the same incident happened in my case from HDFC bank and they did not try to deduct the same amount from savings account neither did they inform me inspite of being a classic customer for many years. what is the method to address such issues? Few years back the same bank had sent me a statement which showed the first page of my a/c and other 4-5 pages of a/c statement of a company from Hyderabad. i naturally assumed that my remaining pages were sent to somebody else which i think is a gross violation of privacy.


7 years ago

First of all the bank knows that the customer is having SB a/c and the interest on FD was being credited to that account.They ought to have debited to that account and sent an advice tho email or sms about the same.Well, when a mistake is made it shd have been accepted in all humility without arrogating to themselves the right to do whatever they want.To err is human and anybody would forgive.Only when you exihibit haughty behaviour people are offended.In this case the bank could have restored the amount to the FD with retrospective date by debiting to SB account with value date.It is possible but it only consumes a little extra time and the banks don't want to do it.After all everywhere everybody gets the same treatment and we also give same treatment to others.We get back what what we do elsewher to our customers


7 years ago

Bank did have the option of calling the party first. Next was to deduct from his least interest bearing account.
Debeting any account of the depositor, without exploring any options, and doing it without giving debit advice is atrocious.
Indian Bank had debited my rarely used account with Rs.369/-. On enquiry I was told it is a computer mistake and I MUST MAKE A WRITTEN REQUEST TO GET BACK THE MONEY. They did refund it promptly in a FEW MONTHS AND AFTER COUPLE OF REMINDERS.
IDBI debited my account, without any advice, with a sum of Rs.110/- for a debit card which I had surrendered a year ago, without using it once, because I never received the pin in time, . In this case also I was told that I can not get a refund UNLESS I MAKE A WRITTEN REQUEST. I had send an email enquiring if IDBI credits my account with a sum of Rs.1,00,000/- by error and if I point out over the phone will the Bank wait till I make a written request. Bank had not replied the email. I am closing all my account on the maturity of last FD. As I understand, at below Rs.15 lac, I am a tiny depositor.
The worst no body feels guilty of this.
Not giving any advice of debiting depositors account by the Bank or not replying communications must be PENALIZED.

Udit C

7 years ago

TDS means deduction at source and must be deducted only against the applicable interest, not against principal nor against Savings balance.

However, the banker may recover the deducted TDS from the Savings balance and credit it to the Deposit account, provided there are enough funds in Savings and if the rules at that point allow the Depositor to give such an instruction.

Udit Chaudhuri

7 years ago

It is for the investor to note that the cumulative deposit will cross Rs 50,000 at the time of making the last renewal towards this, and thus to either fill a Form 15 G/H or submit a proof of PAN and allow deduction subject to a TDS Certificate being given by the bank.

TDS is any way a prepaid tax and if the depositor is a tax-payer, this TDS amount would be adjusted against the overall I-T dues.

However, in case of wrong deduction on interest, rarely do depositors realise that they are also losing their subsequent principal.

All this calls for only three things: caution, caution and more caution.

Domain name battles refuse to die out

What’s in a name, asks the adage. But domain names have a lot riding on them, and cyber-squatting does not seem to be dying down

Cyber-squatting, or the usurping of domain names not claimed by reputed companies, has plagued a number of organisations—both domestic and international—in the past.

Cyber-squatting is an illegal activity of buying and officially recording an address on the Internet—which is the name of an existing company or a well-known person—with the intention of selling it to the owner in order to make money.

Reputed brands like the British Broadcasting Corporation (BBC) have had to go all the way to the United Nations body World Intellectual Property Organisation (WIPO) to win the rights to the use of URL—way back in 2000—when that site was being squatted upon by US-based Data Art Corporation. The BBC subsequently won the case. This is but one example of a number of cases where cyber-squatters have been evicted, when they were found to be encroaching upon famous brand entities.

India has had its own share of cases of cyber-squatting. In September 2009, WIPO ruled in favour of Tata Sons which made Gurgaon-based travel portal MakeMyTrip to transfer the domain to Tata Sons. Again in October 2009, Kotak Mahindra Bank won a cyber-squatting case at the WIPO against a South Korean, who was using the name ‘Kotak’ in an Internet domain.

The cases of cyber-squatting are not just limited to companies; NDTV anchor Barkha Dutt has had to grapple with a case of cyber-squatting too. In 2009, Ms Dutt filed a complaint that a Hyderabad-based cyber-squatter—easyticket—had been using a domain name ‘’, which was registered on 8 January 2007.

The latest case is of Panasonic India’s travails. The Indian domain name of Panasonic,, has been registered in the name of a certain ‘James Bond’, a resident of Taiwan. With Kochhar & Co’s intellectual property partner, Rodney Ryder, Panasonic approached the arbitral tribunal at the ‘.IN Registry’.

The .IN Registry is a non-profit company created by the National Internet eXchange of India (NIXI) in a move to evict cyber-squatters from using domain names for personal or commercial purposes. It is also responsible for the implementation of the various policies of the department of information technology of the Indian government.

Allegations by trademark holders of various cyber-squatting cases continued to rise in 2008, with a record 2,329 complaints filed under the Uniform Domain Name Dispute Resolution Policy (UDRP), representing an 8% increase over 2007. UDRP is a quick and cost-effective dispute resolution procedure administered by the WIPO Arbitration and Mediation Centre.

The reason most cyber-squatters do what they do, is because they can get money from the celebrity or company for giving up the domain name. The George W Bush Library Foundation was forced to cough up $35,000 for retrieving its domain name. A small internet company had bought for less than $10 and then subsequently sold it back it to the library.

“People cyber-squat because they try to get hold of domains that other persons or companies want, with the intent of selling it to that organisation or person at a premium,” a top IT expert said.

Now squatters are trying to pull off another stunt. They have now started typo-squatting. Here they register a domain name that is very similar to the original one. If a surfer makes a typing mistake, he’ll enter a fake domain.


Keep a global watch

Markets may remain bullish over the short term, if global cues remain strong

The market ended on a strong note today, driven by firm global equity markets. It started the day with a gain. However, it slid soon after that and traded
range-bound till afternoon. It regained strength in the afternoon session and ended the day with a strong gain. The BSE Sensex closed at 17,692 points, up 164 points (0.94%) and the Nifty ended at 5,290 points, up 41 points (0.8%). The bullish sentiment may continue to play out over the short term, if global indices remain strong.

Asian stocks rose to an 11-week high on Thursday as China's manufacturing industry picked up and foreign buying boosted the technology-heavy markets of Taiwan and South Korea. The key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea, Singapore, and Taiwan were up by 1.23% to 1.74%.

European stocks were also up, buoyed by the manufacturing data from Europe and China. China's official Manufacturing Purchasing Managers Index rose to 55.10 in March from 52 in February. Meanwhile, a separate China manufacturing PMI released by HSBC Holdings Plc and Markit Economics also rose to 57 in March 2010 from 55.8 in the previous month. The Dow Jones Industrial Average dropped 50 points (down 0.47%) to 10,856. The Nasdaq Composite index slid 12 points (down 0.53%) to 2,398 and the S&P 500 shed 3 points (down 0.33%) to 1,169.

Closer home, the National Stock Exchange (NSE) on Wednesday, 31 March 2010, announced a reduction in market lot size of a number of stocks in the derivatives segment. In its bi-annual review, NSE revised the market lot size from a lot of 124 stocks to a lot of 59 stocks. The food price index rose by 16.35% in the week ended 20th March, higher than the annual rise of 16.22% in the previous week.

The fuel price index rose 12.75%, higher than an annual rise of 12.68% in the previous week. Manufacturing growth in March slowed down from the
20-month record high in February. The Reserve Bank of India (RBI) has reportedly kept the limit of State governments’ short-term borrowing from the central bank, called as ‘Normal Ways and Means Advances’, unchanged for the financial year started Thursday. The government announced a fresh package of incentives worth Rs635 crore for the exporters of garments, engineering, electronics and agricultural products. There will be no increase in the subsidised food price distributed to over 11.5 crore poor families till May. The government announcement was an attempt to refrain from taking any unpopular measures with a high inflation environment.

Prime minister Manmohan Singh has said that elementary education will be free which can be termed as a big-ticket programme from the government to consolidate its rural and poor voters. Foreign institutional investors were net purchasers of Rs433 crore. Domestic institutional investors were net sellers of Rs356 crore. Larsen & Toubro (up 1.4%) has entered to an agreement with Rolls-Royce to manufacture light water reactors in India. State Bank of India (up 1.1%) has said that it has extended the special loan scheme till 30th April. Reliance Industries (up 1.7%) is likely to increase its crude oil imports by about 22% in FY11 as the company plans to raise production in its Jamnagar refinery. IT stocks rose on bargain hunting after a recent slide triggered by a firm rupee. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. Maruti Suzuki India (down 1.8%) said that sales in March this year were 95,123 units which is a rise of 11% over the year-ago period. TVS Motors (up 0.9%) had an increase in sales of 24.35% to 1,46,736 units in March 2010 over the year-ago period. Glenmark Pharmaceuticals’ (up 1.3%) US unit has received approval from the US Food & Drug Administration for a generic drug. The company made this announcement during trading hours today. Shree Ashtavinayak Cine Vision (up 4.9%) said that its board will consider a buyback of shares. State-run power equipment manufacturer BHEL (up 1.4%) announced a jump of about 37% in net profit for 2009-10 at Rs4,287 crore compared to the previous fiscal. The company has received orders worth Rs59,031 crore in 2009-10 compared to Rs59,678 crore in the previous fiscal and recorded the highest-ever orders from the private sector for 14,689MW capacity. The total order book of the company was at Rs1,43,800 crore.


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