💰 Complete Guide to Fixed Deposits (FD) in India (2025)

What is a Fixed Deposit (FD)?

A Fixed Deposit (FD) is a financial instrument provided by banks and NBFCs where you deposit a lump sum amount for a fixed tenure at a predetermined interest rate. FDs offer guaranteed returns and are one of the safest investment options in India. The principal and interest are paid at maturity, and the interest rate remains fixed throughout the tenure regardless of market fluctuations.

How to Calculate FD Interest

FD interest is calculated using two methods:

1. Simple Interest (for non-cumulative FDs):

SI = (P × R × T) / 100

Where: P = Principal amount, R = Annual interest rate, T = Time in years

Example: ₹1,00,000 at 6.5% for 3 years

SI = (1,00,000 × 6.5 × 3) / 100 = ₹19,500

Maturity Amount = ₹1,00,000 + ₹19,500 = ₹1,19,500

2. Compound Interest (for cumulative FDs):

A = P (1 + R/n)^(n×t)

Where: A = Maturity amount, P = Principal, R = Annual interest rate, n = Compounding frequency, t = Time in years

Example: ₹1,00,000 at 6.5% for 3 years (quarterly compounding)

A = 1,00,000 (1 + 0.065/4)^(4×3)

A = 1,00,000 × (1.01625)^12

Maturity Amount = ₹1,21,421

Interest Earned = ₹21,421

Types of Fixed Deposits

1. Regular/Standard FD:

• Most common type of FD
• Single lump sum investment
• Fixed tenure and rate
• Minimum tenure: 7 days, Maximum: 10 years

2. Tax Saver FD (Section 80C):

• 5-year lock-in period (mandatory)
• Tax deduction up to ₹1.5 lakhs under Section 80C
• No premature withdrawal allowed
• Interest still taxable as per income tax slab

3. Senior Citizen FD:

• For individuals aged 60 years and above
• Additional interest rate of 0.25% - 0.75%
• Higher TDS limit (₹50,000 vs ₹40,000 for others)
• Same features as regular FD

4. Flexi FD/Sweep-in FD:

• Linked to savings account
• Auto-transfer excess savings to FD
• Partial withdrawal allowed without penalty
• Earn FD rates on savings

5. Cumulative FD:

• Interest compounded and paid at maturity
• Higher returns due to compounding
• Best for long-term goals
• Single payment at maturity

6. Non-Cumulative FD:

• Interest paid out monthly/quarterly/yearly
• Regular income option
• Lower returns (simple interest)
• Ideal for retirees needing regular income

FD Interest Rates Comparison (2025)

Tenure	SBI	HDFC	ICICI	Post Office
7 days - 45 days	4.00%	3.50%	3.50%	N/A
46 days - 179 days	5.00%	4.50%	4.50%	N/A
180 days - 1 year	6.00%	5.75%	5.75%	6.90%
1 year - 2 years	6.50%	6.50%	6.70%	7.00%
2 years - 3 years	6.75%	7.00%	7.00%	7.00%
3 years - 5 years	7.10%	7.40%	7.50%	7.50%
5 years - 10 years	6.50%	7.00%	7.00%	7.50%

Tax on Fixed Deposits (FD)

TDS (Tax Deducted at Source):

• 10% TDS if interest exceeds ₹40,000 per year (for general public)
• 10% TDS if interest exceeds ₹50,000 per year (for senior citizens)
• Submit Form 15G (below 60) or Form 15H (60+) if total income is below taxable limit
• TDS deducted even if PAN is submitted (refundable if no tax liability)

Income Tax on FD Interest:

• FD interest is added to your total income
• Taxed as per your income tax slab
• No separate tax benefit (except 80C for Tax Saver FD)
• TDS can be claimed as credit while filing ITR

Income Slab (FY 2024-25)	Tax Rate	Tax on ₹20,000 FD Interest
Up to ₹3,00,000	Nil	₹0
₹3,00,001 - ₹7,00,000	5%	₹1,000
₹7,00,001 - ₹10,00,000	10%	₹2,000
₹10,00,001 - ₹12,00,000	15%	₹3,000
₹12,00,001 - ₹15,00,000	20%	₹4,000
Above ₹15,00,000	30%	₹6,000

Premature Withdrawal of FD

Premature Withdrawal Rules:

• Allowed by most banks (except Tax Saver FD)
• Penalty: 0.5% - 1% deduction from contracted rate
• Minimum lock-in: Usually 7 days to 3 months
• Some banks allow partial withdrawal without breaking entire FD

Example of Premature Withdrawal Penalty:

FD of ₹1,00,000 at 7% for 5 years, withdrawn after 2 years:

• Rate for 2-year FD: 6.5%
• Penalty: 1%
• Effective rate: 6.5% - 1% = 5.5%
• Interest earned: ₹1,00,000 × 5.5% × 2 = ₹11,000
• Maturity: ₹1,11,000 (instead of ₹1,14,026 with compound interest)

Recurring Deposit (RD) vs Fixed Deposit (FD)

Feature	Fixed Deposit (FD)	Recurring Deposit (RD)
Investment Type	Lump sum (one-time)	Monthly installments
Minimum Amount	₹1,000 - ₹10,000	₹100 - ₹500 per month
Tenure	7 days to 10 years	6 months to 10 years
Interest Rate	Higher (6.5% - 7.5%)	Slightly lower (6% - 7%)
Returns	Higher (more principal)	Lower (smaller deposits)
Best For	Lump sum investment	Monthly savings habit
Flexibility	Less (one-time deposit)	More (regular deposits)
Premature Withdrawal	Allowed with penalty	Allowed with penalty

Frequently Asked Questions

Q: What is the best tenure for FD in 2025?
A: 2-5 years is optimal. Short-term (<1 year) offers lower rates. Long-term (>5 years) locks money when better opportunities may arise. 3-year tenure typically offers the highest rates (7-7.5%).

Q: Is FD better than savings account?
A: Yes. FDs offer 6-7.5% interest vs 3-4% in savings accounts. For amounts you won't need for 1+ years, FD is better. Keep 3-6 months expenses in savings for emergencies.

Q: Can I break my FD anytime?
A: Yes (except Tax Saver FD). You'll lose 0.5-1% interest as penalty. Banks may require minimum lock-in (7 days to 3 months). Consider Flexi-FD for better flexibility.

Q: How much FD interest is tax-free?
A: None. All FD interest is fully taxable as per your income tax slab. Only Tax Saver FD principal (not interest) qualifies for 80C deduction up to ₹1.5 lakhs.

Q: Which bank gives highest FD rate in 2025?
A: Small finance banks offer highest rates (8-9%): Ujjivan, Equitas, AU Small Finance. Among major banks: ICICI (7.5%), HDFC (7.4%), Kotak (7.6%) for 3-year tenure.

Q: What happens if bank fails? Is my FD safe?
A: FDs are insured by DICGC (Deposit Insurance and Credit Guarantee Corporation) up to ₹5 lakhs per bank. Diversify across banks if deposit exceeds ₹5 lakhs.

Q: Should I choose monthly interest or cumulative FD?
A: Cumulative (compound interest) gives 10-15% higher returns. Choose monthly payout only if you need regular income (e.g., retirees). For wealth building, always choose cumulative.

Q: Can NRIs open FD in India?
A: Yes. NRE FD and NRO FD available. NRE: Tax-free, fully repatriable. NRO: Taxable, partially repatriable. Rates similar to resident FDs. Requires NRE/NRO bank account.

Q: Is joint FD better than single?
A: Yes, for tax planning. Both holders can claim TDS benefit separately (₹40K each). Interest can be split to reduce tax burden. Use "Either or Survivor" for easy access.

Q: What's the minimum and maximum FD amount?
A: Minimum: ₹1,000 (SBI, BOB, PNB), ₹5,000 (HDFC, Axis), ₹10,000 (ICICI, Kotak). Maximum: No limit, but DICGC insurance only up to ₹5 lakhs per bank.