Fixed Deposit Maturity Summary
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is one of the safest and most popular investment instruments in India. You deposit a lump sum with a bank or NBFC for a fixed tenure at a pre-agreed interest rate. The rate does not change during the tenure — regardless of market conditions — making it a risk-free, predictable investment. All bank FDs are insured up to ₹5 lakh per depositor per bank by the DICGC (Deposit Insurance and Credit Guarantee Corporation), a subsidiary of the RBI.
How FD Interest is Calculated in India
For cumulative FDs where interest is paid at maturity, Indian banks use quarterly compounding: A = P × (1 + r/4)^(4×t), where A is the maturity amount, P is the principal, r is the annual interest rate as a decimal, and t is the tenure in years. For non-cumulative FDs with quarterly or monthly payouts, simple interest is calculated on the original principal for each period and paid out without reinvestment.
Example: ₹5 Lakh FD at 7% for 3 Years
With quarterly compounding: A = 5,00,000 × (1 + 0.07/4)^(4×3) = 5,00,000 × (1.0175)^12 = approximately ₹6,13,900. Interest earned = ₹1,13,900. For the same deposit with monthly payouts (non-cumulative), the quarterly interest payout = 5,00,000 × (7/400) = ₹8,750 per quarter. Total interest over 3 years = ₹1,05,000. Cumulative earns more because the interest is reinvested and compounds.
Current FD Rates in India (2025)
Major Indian banks currently offer FD rates ranging from 6.5% to 7.25% for general citizens on 1–3 year tenures. SBI offers 6.80%–7.10%, HDFC Bank offers 7.00%–7.25%, and ICICI Bank offers 6.70%–7.20% depending on the tenure. Senior citizens receive an additional 0.25%–0.75% on top of regular rates. Small finance banks such as AU Small Finance Bank and Jana Small Finance Bank offer higher rates — sometimes above 8% — but carry slightly higher credit risk as DICGC insurance still applies per-bank per-depositor.
FD vs RD vs SIP — Which is Better?
FDs are best for lump-sum investments where capital safety and guaranteed returns are the priority. RDs (Recurring Deposits) serve the same purpose but for regular monthly contributions instead of a lump sum. SIPs (Systematic Investment Plans) in mutual funds have higher potential returns over the long term but come with market risk. For short-term goals (1–3 years) or emergency funds, FDs are ideal. For long-term wealth building (7+ years), SIPs in equity mutual funds typically outperform FDs significantly after accounting for inflation.
Tax on FD Interest in India
FD interest is fully taxable as "Income from Other Sources" at your applicable income tax slab rate — 5%, 20%, or 30%. Banks deduct TDS at 10% if your annual FD interest across all branches of that bank exceeds ₹40,000 (₹50,000 for senior citizens). If your total income is below the basic exemption limit, you can submit Form 15G (or Form 15H for senior citizens) at the beginning of each financial year to request that no TDS is deducted.
Premature FD Withdrawal
Most Indian banks allow you to break your FD before maturity, but they charge a premature withdrawal penalty — typically a 0.5% to 1% reduction on the applicable interest rate for the actual period held. For example, if you held a 3-year FD for 1.5 years and the 1-year rate was 6.5%, you would receive 6.5% minus the penalty, not the 3-year rate. Tax-saving FDs have a mandatory 5-year lock-in period under Section 80C and cannot be broken early under any circumstances.
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Frequently Asked Questions
For cumulative FDs, banks compound quarterly: A = P × (1 + r/4)^(4×t). For periodic payout FDs, simple interest is paid each period on the original principal without reinvestment. Cumulative FDs earn more total interest because the earned interest itself earns interest.
For a ₹5,00,000 FD at 7% annual interest for 3 years with quarterly compounding, the maturity amount is approximately ₹6,13,900. Interest earned is approximately ₹1,13,900.
Yes. Most Indian banks offer senior citizens (60 years and above) an additional 0.25%–0.75% over the regular FD rate. SBI, HDFC, and ICICI currently offer 0.50% extra on most tenures. Tick the senior citizen checkbox in the calculator above to factor this in.
Yes. FD interest is taxable at your income tax slab rate as "Income from Other Sources." Banks deduct TDS at 10% if annual interest exceeds ₹40,000 (₹50,000 for senior citizens). Submit Form 15G or 15H at the start of the financial year if your income is below the taxable limit.
Yes, for most FDs. Banks charge a premature withdrawal penalty of 0.5%–1% on the applicable rate. Interest is paid at the rate for the actual period held, minus the penalty. Tax-saving FDs under Section 80C have a mandatory 5-year lock-in and cannot be broken early.