Fixed Deposit

Full form: Fixed Deposit (FD)

Savings & Deposits

A Fixed Deposit is a savings instrument where you deposit a lump sum with a bank or post office for a fixed tenure at a predetermined interest rate. Principal and interest are guaranteed regardless of market conditions -- India's most popular savings product.

In detail

FDs offer safety, predictability and guaranteed returns. Key features: tenures from 7 days to 10 years, interest paid monthly/quarterly/annually or at maturity, senior citizens get 0.25-0.5% higher rates, and deposits up to Rs 5 lakh per bank are insured by DICGC.nnInterest is fully taxable as income. Banks deduct 10% TDS when annual interest exceeds Rs 40,000 (Rs 50,000 for senior citizens). Submit Form 15G (under 60) or 15H (senior) to avoid TDS if total income is below the taxable limit.

Formula

Maturity (quarterly compounding) = P x (1 + r/4)^(4t) P = Principal, r = Annual rate/100, t = Years Example: Rs 2L at 7% quarterly for 3 years: = 2,00,000 x (1.0175)^12 = Rs 2,46,289

Real-life example

🇮🇳 India example

Rs 2 lakh in SBI FD at 7% for 3 years quarterly compounding. Maturity = Rs 2,46,289. Interest = Rs 46,289. At 30% tax bracket, tax on interest = Rs 13,887. Post-tax effective return = 4.9% per year -- barely above inflation.

Frequently asked questions

Which bank gives the highest FD interest rate in 2025? ▼
Small finance banks (Unity, Suryoday, Jana) offer 8.5-9.5%. Among major banks, IndusInd, Yes Bank, IDFC First offer 7.5-8.25%. SBI/HDFC/ICICI typically offer 7.0-7.4%. Post Office 5-year time deposit is 7.5%. Always verify current rates directly.
What is a tax-saver FD? ▼
A 5-year tax-saver FD qualifies for Rs 1.5L deduction under Section 80C. However interest earned is still fully taxable. Cannot be broken before 5 years. Compare with PPF (same 80C benefit, interest completely tax-free, higher long-term rate) before choosing.
Should I use FD laddering? ▼
Yes. Instead of one large FD, split into multiple FDs maturing in 1, 2, 3, and 4 years. Each year one matures, giving you liquidity and the ability to reinvest at current rates. This reduces reinvestment risk and ensures you are never fully locked at a single rate.