What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is a low-risk investment instrument offered by banks and NBFCs where you deposit a lump sum amount for a fixed tenure at a pre-determined interest rate.
Unlike stock market investments, FDs offer guaranteed returns and capital safety, making them the preferred choice for conservative investors and senior citizens.
Types of Fixed Deposits
- Regular FD: Standard fixed deposit with flexible tenure from 7 days to 10 years.
- Tax Saver FD: 5-year lock-in period with Section 80C benefits up to ₹1.5 lakh.
- Senior Citizen FD: Additional 0.25-0.5% interest for investors above 60 years.
- Cumulative FD: Interest compounded and paid at maturity for maximum returns.
- Non-Cumulative FD: Interest paid monthly/quarterly/yearly for regular income.
- Flexi FD: Combination of savings and FD with automatic sweep facility.
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Who is Eligible for Fixed Deposit?
Almost any investor category can open an FD in India. Common eligibility includes:
- Resident Individuals: Including minors (with guardians).
- Senior Citizens: Eligible for higher interest rates (usually 0.25-0.5% extra).
- NRIs: Can open NRE (repatriable) or NRO (non-repatriable) FDs.
- Organizations: HUFs, Partnership Firms, Trusts, and Companies.
Benefits of Fixed Deposits
- Capital Safety: FDs up to ₹5 Lakh per bank are insured by DICGC (Deposit Insurance and Credit Guarantee Corporation).
- Guaranteed Returns: Fixed interest rate locked at the time of deposit, unaffected by market volatility.
- Liquidity: Premature withdrawal allowed with minimal penalty (0.5-1% usually).
- Tax Saving: 5-Year Tax Saver FDs qualify for Section 80C deduction up to ₹1.5 lakh.
- Loan Facility: Get loans against FD (up to 90% of deposit value) at lower interest rates.
- Flexible Tenure: Choose from 7 days to 10 years based on your financial goals.
FD vs Other Safe Investment Options
| Feature | Bank FD | PPF | RD |
|---|---|---|---|
| Returns | 6.5% – 7.5% | 7.1% (Fixed) | 6.5% – 7.5% |
| Investment Mode | Lump Sum | Lump Sum or Yearly | Monthly |
| Lock-in Period | Flexible (7 days - 10 yrs) | 15 Years | 6 months - 10 years |
| Tax on Returns | As per tax slab | Fully Tax Free (EEE) | As per tax slab |
| 80C Benefit | Yes (5-year FD only) | Yes | No |
| Liquidity | High (with penalty) | Partial (after 7 years) | Low (discouraged) |
TDS on FD Interest (2026 Rules)
Interest earned on Fixed Deposits is fully taxable as per your income tax slab. It is added to your annual income under "Income from Other Sources".
- TDS Deduction: Banks deduct 10% TDS if interest exceeds ₹40,000 in a year (₹50,000 for Senior Citizens).
- Form 15G/15H: You can submit these forms to the bank to avoid TDS if your total income is below the taxable limit.
- Higher TDS: 20% TDS if PAN is not provided to the bank.
- Advance Tax: If TDS is insufficient, you may need to pay advance tax to avoid penalties.
How to Use this FD Calculator
- Enter your deposit amount (principal).
- Input the interest rate offered by your bank (check latest rates).
- Select tenure in years and additional months.
- Choose compounding frequency (quarterly is most common).
- Enable senior citizen mode if you're 60+ years for bonus rates.
- Click "Compare Bank Rates" to see current rates from popular banks.
- Save your calculation or share via WhatsApp for future reference.