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Fixed income and savings

Fixed Deposits

Park money for a fixed period at a fixed rate. Simple, predictable and widely available.

Read the guide FD Calculator
Regulator
RBI
Insurance
DICGC cover up to ₹5 lakh per depositor per bank
Term
7 days to 10 years
Early exit
Usually allowed with a penalty, except tax-saving FDs
Risk level: Low

Bank deposits are insured up to ₹5 lakh per bank. Company deposits carry credit risk and no insurance.

What is it?

A fixed deposit locks your money with a bank, small finance bank, post office or company for an agreed term at an interest rate fixed on the day you deposit. You can take the interest monthly or quarterly, or let it compound until maturity.

Bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of RBI, for up to ₹5 lakh per depositor per bank, including interest. Company and NBFC deposits are not covered and depend on the company's strength.

How it works

  1. Choose the term and payout option: cumulative (interest added to principal) or periodic (interest paid out).
  2. The rate is fixed for the full term, even if rates later change.
  3. Banks deduct TDS if your interest crosses the threshold, unless you submit Form 15G or 15H where eligible.
  4. Breaking the deposit early usually reduces the rate by 0.5% to 1%.

Types

Bank FDsOffered by all scheduled banks, with higher rates for senior citizens.
Small finance bank FDsOften higher rates, with the same DICGC cover.
Tax-saving FDs5-year lock-in; deduction up to ₹1.5 lakh under the old tax regime only.
Corporate and NBFC FDsHigher rates, no insurance; check the credit rating.
Post Office Time DepositsBacked by the Government of India for 1, 2, 3 or 5 years.

Benefits and risks

Benefits

  • Certainty of return and capital.
  • Easy to open and understand.
  • Deposit insurance on bank FDs.
  • Useful for emergency funds and short-term goals.

Risks and drawbacks

  • Interest is fully taxable, so post-tax returns may not beat inflation.
  • Rates are locked: you miss out if rates rise later.
  • Penalty for early withdrawal.
  • Corporate deposits can default.

How it is taxed

  • Interest is added to your income and taxed at your slab rate every year, even on cumulative FDs where you receive it only at maturity.
  • TDS is deducted above the annual threshold; it is not the final tax, so declare the full interest in your return.
Rules for FY 2026-27, reviewed November 2026. Surcharge and cess apply on top. Tax rules change, so confirm before you file. Our tax team can help with your return.

Who it may suit

Anyone who needs safety and certainty for an emergency fund or a goal under three years away, and conservative investors who want predictable income.

Getting started

  1. Compare rates across banks for your chosen term.
  2. Keep each bank's total within the ₹5 lakh insurance limit if safety is the priority.
  3. Add a nominee and choose the payout option.
  4. Ladder deposits across different maturities to keep some money available every year.

Common questions

Is the ₹5 lakh insurance per account?

No. It is per depositor per bank, across all your accounts and deposits at that bank in the same capacity, including interest.

FD or debt fund?

An FD gives a fixed rate and certainty. A debt fund's value moves daily but offers more liquidity and flexibility. Both are taxed at your slab rate for most investors today.

This guide is general education, not investment, tax or legal advice, and does not recommend any product. Investments in securities markets are subject to market risks; read all related documents carefully before investing.