What Is a Fixed Deposit?

The basics

A fixed deposit (FD) is an arrangement where you place a lump sum with a bank for a chosen term — anywhere from a few days to several years. In return, the bank pays interest at a rate fixed when you open the deposit. Because the rate is contracted, you know the maturity value in advance.

What the rate depends on

FD interest rates vary by bank, deposit term, and depositor category, and they change over time based on prevailing conditions. For that reason we never present any single FD rate as universal. Always check the current rate with your bank before booking.

Illustration: ₹2 lakh at 6.5% for one year

With quarterly compounding, the deposit matures at about ₹2,13,320 — ₹320 more than simple interest would give, because each quarter's interest earns interest in the following quarters. Over three years the same rate gives about ₹2,42,370. Interest is taxable in the year it accrues, and the bank deducts TDS once interest crosses its annual threshold, unless you file Form 15G/15H and qualify.

Types you will be offered

• Cumulative — interest reinvested, paid at maturity. Best for a future lump sum.
• Non-cumulative — interest paid monthly/quarterly. Best for regular income. See cumulative vs non-cumulative FD.
• Tax-saver FD — five-year lock-in, eligible for deduction under the old tax regime (Section 80C of the 1961 Act; Section 123 of the Income-tax Act, 2025, which applies from 1 April 2026) within the overall ₹1.5 lakh limit; interest remains taxable. Verify current eligibility with the Income Tax Department.
• Senior-citizen FD — a fixed rate addition for depositors above 60.
• Flexi / sweep-in — linked to a savings account; surplus above a threshold is swept into an FD and swept back when needed.

How safe is an FD?

Deposits with scheduled banks are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, up to ₹5 lakh per depositor per bank, covering principal and interest together for deposits held in the same right and same capacity (all branches of one bank are aggregated; deposits in different banks are insured separately). Source: DICGC — A Guide to Deposit Insurance, checked October 2026. Deposits with non-banking finance companies and corporates are not covered by DICGC and carry the issuer's credit risk, which is why they offer higher rates.

Laddering for flexibility

Instead of one ₹5 lakh FD, five ₹1 lakh FDs maturing in years 1 to 5 give you access to money every year and spread reinvestment across different rate environments. Plan each rung with the FD calculator.

Payout vs cumulative

You can usually choose to receive interest periodically (a payout or non-cumulative FD) or let it compound and receive everything at maturity (a cumulative FD). The cumulative option generally results in a higher maturity value because interest earns further interest.

Estimate maturity under any rate you enter with the FD calculator.