Discover the secret to financial security with fixed deposits in India - earn more and worry less!


Fixed Deposits (FDs) are one of the most popular investment options in India. It is a secure and low-risk investment instrument that offers higher returns than a savings account. In this curated article, we will discuss everything you need to know about fixed deposits in India.


What is a Fixed Deposit

A Fixed Deposit is a financial instrument provided by banks and non-banking financial institutions (NBFCs) that offer a higher interest rate than a savings account. It is a type of investment where an investor deposits a lump sum of money with a bank/NBFC for a specified period, and in turn, the bank/NBFC pays interest on the deposited amount.

Different types of FDs

There are various types of Fixed Deposits available in the Indian market, which includes:

  • Regular Fixed Deposits: These deposits have a fixed maturity period, and the interest rate offered is predetermined at the time of investment.
  • Flexi Fixed Deposits: It is a variant of the regular fixed deposit and offers the flexibility of withdrawing the money anytime without penalty charges.
  • Senior Citizen Fixed Deposits: Fixed deposits offered to senior citizens come with higher interest rates compared to regular FDs.
  • Tax Saving Fixed Deposits: These types of fixed deposits come with a lock-in period of five years, and the interest earned on them is tax-deductible up to INR 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Features and Benefits of FDs

The following are some of the features and benefits of Fixed Deposits:

  • Low-risk instrument: Fixed deposits are a low-risk investment option as compared to other market-linked instruments like stocks and mutual funds.
  • Guaranteed Returns: The returns on Fixed Deposits are assured of and are not affected by market fluctuations.
  • Flexible Tenure: Fixed Deposits come with flexible tenure options starting from seven days to ten years, and investors can choose the tenure as per their convenience.
  • Loan Against FD: One of the significant advantages of Fixed Deposits is that it can be used as collateral to avail loans from the same bank/NBFC without breaking the deposit.
  • Multiple Interest Payment Options: FD interest can be received monthly, quarterly, half-yearly, annually, or even on maturity, depending on the choice of the investor.

How to open a fixed deposit account

Here's how you can open a Fixed Deposit account in India:

  • Choose a Bank/NBFC that offers Fixed Deposits.
  • Fill the application form with necessary information like account type, investment amount, tenure, and other details.
  • Submit ID proof, PAN card, and address proof as specified by the bank/NBFC.
  • Invest the amount by writing a cheque or making an online transfer.
  • Once the amount is credited to the Fixed Deposit account, the account is activated, and interest starts to accrue.



Interest Rates and Calculation

The interest rate offered by banks/NBFCs vary depending on the tenure and type of Fixed Deposit. The following are the factors that affect FD interest rates and how FD interest is calculated:

Factors that affect FD interest rates

The following are the factors that can affect Fixed Deposit interest rates:

  • Repo Rate: The Reserve Bank of India (RBI) determines the repo rate, which directly impacts FD interest rates. Higher repo rates lead to higher Fixed Deposit interest rates.
  • Tenure Period: Longer tenure periods usually attract higher FD interest rates.
  • Investment Amount: Many banks offer higher interest rates for deposits above a certain amount.
  • Banks' Cost of Funds: The cost of funds with banks and NBFCs can impact the FD interest rate.
  • Economic Conditions: The economic situation in the country can also impact the Fixed Deposit interest rates.

Calculation of FD interest

The following is the formula to calculate interest on Fixed Deposits in India:

A = P x (1 + r/n) ^ (n x t)


  • A = Maturity Value.
  • P = Principal Amount
  • r = Rate of Interest
  • n = Frequency of Interest
  • t = Tenure

Taxation on FD interest

Interest on Fixed Deposits in India is taxable as per your income tax slab. TDS is deducted at the rate of 10% on the interest earned if it exceeds INR 40,000 per financial year. However, the deduction can be avoided by submitting Form 15G/15H if an investor's income falls below the taxable limit.

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Liquidity and Pre-mature Withdrawal

Fixed Deposits have some amount of liquidity concern, as money is locked for a specific period. However, banks and NBFCs give an option of pre-mature withdrawal of Fixed Deposits.

Rules and regulations for premature withdrawal

Banks offer the facility of premature withdrawal of Fixed Deposits before the maturity period, but it comes with certain terms and conditions. The following are some of the things to keep in mind before opting for pre-mature withdrawal:

  • Penalty on withdrawal: Banks usually charge a penalty fee for premature withdrawal, which varies from bank to bank.
  • Partial Withdrawal: Banks allow partial withdrawal of Fixed Deposits. The withdrawn amount is calculated based on the pro-rate basis and varies based on the bank's policy.
  • Nomination: Nomination is essential while opening a Fixed Deposit account to enable payment to the nominee in case of the depositor's death before maturity.

Liquidity of FDs

Fixed Deposits have low liquidity, but they provide a high degree of safety and guaranteed returns. It is ideal for someone who is looking for long-term investment options but wants guaranteed returns.


Comparison with other investment options

Fixed Deposits offer a low-risk investment option for investors looking for guaranteed returns. Here is a comparison of Fixed Deposits with other investment options:

Comparison between FDs and savings account

Fixed Deposits offer higher interest rates than a savings account. Fixed Deposits come with a fixed tenure, while savings accounts do not have a maturity period.

Comparison between FDs and mutual funds

Mutual funds are market-linked investment options that have the potential to earn higher returns than Fixed Deposits. However, mutual funds come with higher risk and market fluctuations.

Comparison between FDs and stocks

Stocks offer a higher rate of returns as compared to Fixed Deposits. However, stocks come with higher risk and market volatility. Fixed Deposits are ideal for someone looking for low-risk investment options.

Being mindful of errors while filing GST returns can help businesses minimize the risk of penalties and ensure compliance with GST regulations.


Tips for Investing in Fixed Deposits

Fixed Deposits are a secure and low-risk investment option for investors. Here are some tips to consider before investing in Fixed Deposits:

Tenure and interest rate

Choose the tenure and interest rate based on your personal preferences and financial goals.

Laddering strategy for FDs

Invest in Fixed Deposits using the Laddering strategy. Laddering strategy helps in avoiding liquidity risk by breaking the deposit amount into different tenures.

Diversification of FDs

Diversify FD investments across multiple banks to avoid concentration risk in a single bank/NBFC.

Tax implications

Understand the tax implications of FD investments and plan your investments accordingly.


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Fixed Deposits are a great investment option for those who want to earn guaranteed returns with minimum risk. As an investor, it is important to understand the nuances of FDs before investing. We hope this curated article will help you in making informed investment decisions.