FD interest is compounded quarterly (four times a year), meaning earned interest is added to your principal every three months.
Cumulative FDs reinvest interest to compound returns until maturity. Non-cumulative FDs pay out interest regularly (monthly or quarterly) for cash flow.
Yes, FD interest is completely taxable under 'Income from Other Sources' at your applicable income tax slab rates.
Banks deduct TDS at 10% if your annual interest income across deposits exceeds ₹40,000 (₹50,000 for senior citizens).
If your total taxable income is below the taxable threshold, submit Form 15G (Form 15H for senior citizens) to prevent TDS.
Banks typically levy a penalty of 0.5% to 1.0% on the interest rate for premature withdrawals.
A special 5-year lock-in fixed deposit that offers tax deductions up to ₹1.5 Lakhs under Section 80C. Premature withdrawals are not allowed.
Yes, most commercial banks offer senior citizens an additional interest rate markup of 0.50% to 0.75% p.a.
The maximum tenure allowed for a fixed deposit in Indian commercial banks is 10 years.
Yes, you can typically borrow up to 90% of your FD value as an overdraft or loan at an interest rate 1% to 2% higher than the FD rate.
A Fixed Deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It is one of the safest and most popular investment options in India.
How is FD Interest Calculated?
FD interest is usually compounded quarterly. The formula used for calculating the maturity amount is:
A = P × (1 + r/n)n×t
Where:
A = Maturity Amount
P = Principal amount deposited
r = Annual interest rate (decimal)
n = Number of times interest is compounded per year (usually 4 for quarterly)
t = Tenure in years
Frequently Asked Questions (FAQs)
Is my money safe in an FD?
Yes. Deposits in scheduled commercial banks are insured by DICGC (a subsidiary of RBI) up to ₹5 Lakhs per depositor per bank, including both principal and interest.
Do senior citizens get higher rates?
Yes, almost all banks offer an additional interest rate of 0.50% to 0.75% per annum for senior citizens (above 60 years of age).