How is FD interest taxed in India?

Interest on bank Fixed Deposits is fully taxable as 'Income from Other Sources' according to your tax slab. TDS at 10% is deducted if annual interest exceeds ₹40,000 (₹50,000 for senior citizens).

Can I break an FD before maturity?

Yes, premature withdrawal of bank FDs is permitted, usually subject to a 0.5% to 1% interest rate penalty fee.

What is the difference between Cumulative and Non-Cumulative FD?

In Cumulative FDs, interest is compounded quarterly and paid upon maturity. In Non-Cumulative FDs, interest is paid out periodically (monthly, quarterly, or annually).

What are Tax-Saving Fixed Deposits?

Tax-saving FDs come with a mandatory 5-year lock-in period and qualify for tax deductions up to ₹1.5 Lakh per financial year under Section 80C of the Income Tax Act.

Do senior citizens get higher FD interest rates?

Yes, most Indian banks offer an additional 0.50% to 0.75% interest rate to senior citizens (aged 60 and above) compared to general public FD rates.

FD Calculator

Calculate total maturity value and interest earnings on guaranteed bank Fixed Deposits (FD).

Total investment

₹

Rate of interest (p.a)

Time period (Years)

Invested amount₹1,00,000

Est. returns₹38,042

Total value₹1,38,042

Understanding Fixed Deposit (FD)

A Fixed Deposit (FD) is one of the safest financial investment options available in India. Offered by commercial banks, NBFCs, and post offices, an FD allows you to lock in a lump sum amount for a fixed tenure at an agreed rate of interest that remains immune to stock market volatility.

Dailytrades Pro Tip for FD Investors

Instead of locking your entire lump sum in a single FD, consider FD Laddering—splitting your deposit into multiple FDs maturing across 1, 2, 3, 4, and 5 years. This provides liquidity every year while reinvesting at potentially higher market interest rates.

How Bank FD Compound Interest Works

Commercial banks in India compound FD interest on a quarterly basis. The formula used to determine the total maturity amount is:

A = P × (1 + r / 400)^(4 × t) Where: A = Total Maturity Value (₹1,38,042) P = Total Principal Investment (₹1,00,000) r = Annual Interest Rate (6.5% p.a.) t = Time Period (5 Years / 20 Quarters)

Key Benefits of Fixed Deposit

Guaranteed Capital Growth: Returns are fixed upon deposit, completely shielded from equity market swings.
Tax Savings (Sec 80C): 5-Year Tax Saving FDs qualify for tax deductions up to ₹1.5 Lakh under Section 80C.
Deposit Insurance Security: Principal and interest up to ₹5 Lakh per bank are insured by the Reserve Bank of India‘s DICGC subsidiary.
Higher Senior Citizen Rates: Senior citizens enjoy an additional interest rate top-up of 0.50% to 0.75% p.a.

Frequently Asked Questions (FAQs)

Interest earned on FDs is added to your annual gross income and taxed as per your applicable income tax slab. If annual FD interest exceeds ₹40,000 (₹50,000 for senior citizens), banks deduct 10% TDS (20% if PAN is not updated).

Financial calculators by Dailytrades

FD Calculator

Understanding Fixed Deposit (FD)

How Bank FD Compound Interest Works

Key Benefits of Fixed Deposit

Frequently Asked Questions (FAQs)