What is an FD?

A Fixed Deposit (FD) is the most popular and safe investment in India. You deposit a lump sum for a fixed tenure (7 days to 10 years) at a guaranteed interest rate. Returns are predictable and the principal is safe (DICGC insurance covers up to ₹5 lakh per bank). Banks typically compound interest quarterly. Best for: emergency funds, short-term goals (1-3 years), conservative investors, senior citizens (additional 0.5% interest).

How to use

1. Enter principal — One-time deposit amount
2. Set interest rate — Currently 5.5-7.5% depending on bank/tenure
3. Choose tenure — 7 days to 10 years
4. Compounding frequency — Quarterly is standard

Formula

Compound Interest Formula:

A = P × (1 + r/n)^(n×t)

Where P = principal, r = annual rate, n = compounding frequency, t = years.

For quarterly compounding (n=4): ₹1L at 7% for 5 years = ₹1,41,478.

Tips

• Compare bank rates — small finance banks (AU, Equitas, Ujjivan) offer 8-9%
• Senior citizens get additional 0.50% on most banks
• Tax-saver FDs (5-year lock-in) eligible for 80C deduction
• TDS @ 10% applied if annual interest > ₹40,000 (₹50,000 seniors)
• Avoid premature withdrawal — usually 1% penalty on interest rate

FAQs

Is FD interest taxable?

Yes — treated as income from other sources, taxed at your slab rate. Bank deducts TDS at 10% if interest exceeds threshold.

Which bank offers highest FD?

Small finance banks (AU, Suryoday, Equitas, Ujjivan): 8-9%. Major PSU/Private banks (SBI, HDFC, ICICI): 6.5-7.5%. Always check DICGC insurance limit (₹5L per bank).

What is the difference between cumulative and non-cumulative FD?

Cumulative: interest reinvested, paid at maturity. Non-cumulative: interest paid monthly/quarterly to your account. Choose based on whether you need regular income.

Should I break my FD early?

Usually no — banks charge 0.5-1% penalty on interest rate. Better: take a loan against FD (typically 75-90% of FD value) at 1-2% above FD rate.

Related

RD Calculator · PPF Calculator · Compound Interest