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A fixed deposit is a deposit with a bank or NBFC where you lock a sum for a fixed tenure at a fixed interest rate agreed upfront. It is one of the safest options for Indian savers — returns are guaranteed and, for scheduled banks, deposits are insured up to ₹5 lakh per depositor by the DICGC. The trade-off is lower long-term returns than equity and interest that is fully taxable.
Most bank FDs compound interest quarterly. You can choose a cumulative FD, where interest is reinvested and paid with the principal at maturity, or a payout FD, where interest is credited monthly or quarterly for regular income. A longer tenure and quarterly compounding both increase your effective yield.
FD interest is added to your income and taxed at your income tax slab rate under “Income from Other Sources.” From FY 2025–26, banks deduct 10% TDS once your interest from that bank crosses ₹50,000 in a year (₹1,00,000 for senior citizens), subject to applicable Section 194A rules; without a PAN, TDS is 20%. A 5-year tax-saving FD qualifies for a Section 80C deduction of up to ₹1.5 lakh, but only under the old tax regime.
Deposit ₹1,00,000 for 5 years at 7% p.a., compounded quarterly:
Maturity value: ≈ ₹1,41,478 • Interest earned: ≈ ₹41,478 (before tax). Your actual post-tax return depends on your slab — for a 30% taxpayer, roughly a third of the interest goes to tax.
Enter your deposit amount, interest rate, and tenure. The calculator shows your maturity value and total interest, so you can compare tenures and rates before booking an FD.
Yes. The entire interest is taxable at your slab rate, whether paid out or reinvested. TDS deducted by the bank is only an advance — your final liability depends on your total income, and you settle any difference when filing your return.
FDs offer guaranteed returns and simplicity. Debt funds can be more tax-efficient for some investors and offer easier liquidity, but their returns are not guaranteed. The better choice depends on your tax slab, horizon, and need for certainty.
Most banks allow premature withdrawal but apply a penalty (often 0.5–1%) and pay interest at the rate for the period actually completed, which reduces your effective return.
