Fixed Deposit
Definition
A financial instrument where you deposit a lump sum with a bank for a fixed tenure at a predetermined interest rate. FDs offer guaranteed returns with zero market risk. Interest is typically compounded quarterly. Premature withdrawal incurs a penalty of 0.5-1%.
Why is Fixed Deposit Important?
In the context of wealth creation and investing in India, Fixed Deposit is a fundamental concept. Whether you are investing in mutual funds via SIPs, fixed deposits, or retirement schemes like PPF and NPS, this metric helps evaluate potential returns and risks. The power of compounding and market volatility make it essential to track this indicator for any long-term portfolio.
Investors are encouraged to use specific investment calculators to project the future value of their corpus. Understanding this term enables better asset allocation, inflation protection, and consistent progress toward your ultimate financial goals.
What is a Fixed Deposit?
A Fixed Deposit (FD) is a financial instrument where you deposit a lump sum with a bank or NBFC for a predetermined period at a fixed interest rate. FDs are one of the safest investment options in India, with bank FDs up to โน5 lakh covered by DICGC insurance.
FD Interest Rates (Major Banks โ Indicative)
| Bank | 1 Year | 3 Years | 5 Years | Senior Citizen Extra |
|---|---|---|---|---|
| SBI | 6.80% | 7.00% | 6.50% | +0.50% |
| HDFC | 6.60% | 7.10% | 7.00% | +0.50% |
| Post Office | 6.90% | 7.10% | 7.50% | โ |
Tax on FD Interest
- FD interest is fully taxable as per your income tax slab
- TDS of 10% deducted if annual interest exceeds โน40,000 (โน50,000 for senior citizens)
- Tax-saving FDs (5-year lock-in) qualify for Section 80C deduction up to โน1.5 lakh