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Fixed Deposit

Fixed Deposit Investment in India

Last Updated 10th May 2021

Fixed Deposits also known as Term Deposits or Fixed Deposit Receipt (FDR), is a fixed income instrument where the depositor saves money for a fixed time at a fixed rate. FDs are popular as they offer higher interest rates compared to savings deposits and are safe.

Rate of Interest 2.25% to 7.25%
Interest payment Monthly, Quarterly or Annually
Tenure 7 Days to 10 Years
Deposit Amount ₹ 100 or No limit
Top Providers Banks, NBFCs and Small Finance Banks
Deposit Insurance Available under DICGC for Banks. Not applicable to NBFC FDs.
Popular FD Schemes Regular FD, Sweep-in FDs, Senior Citizens Fixed Deposits and Tax Saving Schemes
Earn upto 7.25% on FD APPLY NOW

Top Bank Fixed Deposit Schemes in India

Bank FD Tenure Interest Rates
SBI Fixed Deposit 7 Days - 10 Years 2.90% - 5.40% Explore More Calculator
HDFC Bank Fixed Deposit 7 Days - 10 Years 2.50% - 5.50% Explore More Calculator
ICICI Bank Fixed Deposit 7 Days - 10 Years 2.50% - 5.50% Explore More Calculator
Axis Bank 7 Days - 10 Years 2.50% - 5.75% Explore More Calculator
ICICI Home Finance 12 Months - 120 Months 4.30% - 6.45% Explore More Calculator
Kotak Bank 7 Days - 10 Years 2.50% - 5.30% Explore More Calculator
PNB Housing Finance 12 Months - 84 Months 5.90% - 6.70% Explore More Calculator
IDFC First Bank 7 Days - 10 Years 2.75% - 6.00% Explore More Calculator
Bank of Baroda 7 Days - 10 Years 2.80% - 5.25% Explore More Calculator
Citibank 7 Days - 1825 Days 2.40% - 3.50% Explore More Calculator
IDBI Bank 7 Days - 20 Years 2.90% - 5.10% Explore More Calculator

Fixed Deposit Account

Fixed Deposits also known as ‘term deposits’ or ‘time deposits’ is a low-risk financial instrument that is offered by banks, post offices or Non-Banking Financial Companies (NBFCs). The duration of a fixed deposit may vary from 7 days to 10 years. Key Features are:

  • Definition: A fixed deposit is an investment scheme provided by banks and non-banking financial institutions that offers returns at a fixed interest rate over a definite tenure.
  • Safety: Deposits up to ₹ 5,00,000 with banks are covered under deposits insurance. However, deposit insurance under DICGC is not available for NBFC deposits and the safety of their deposits are to be evaluated based on their ratings.
  • Rates: As per today’s rate, interest rates on FDs can range between 2.25% to 7.25%.
  • Tenure: Option to choose a FD from 7 Days to 10 Years.
  • FD Renewal: Available as per bank’s discretion and at the rates as applicable at the time of renewal.
  • Loan against FD: Available from the same bank with which you have a FD at 0.75-1% higher rate on FD to help a customer with funds without the need to break the FD.
  • Breaking of FD: Available but with penalty charges in the form of lower interest rate or direct penalties linked to FD amount.
  • Popular FD Schemes: Senior Citizens FD Scheme, Tax Saving Fixed Deposits, FDs of Small Finance Banks along with Regular FD schemes.

Type of Fixed Deposit

There are some different types of fixed deposits where you can invest your money as per your convenience and investment needs.

  • Regular Fixed Deposit: In a regular fixed deposit, you can invest your funds ranging from 7 days to 10 years for a fixed period. These deposits are taxable as per your tax slab rate. You can choose cumulative or non-cumulative fixed deposits as per your requirements. In a cumulative FD, interest is paid at the time of maturity, and you can choose to withdraw interest on a monthly, quarterly or half-yearly basis in a non-cumulative fixed deposit.
  • Tax-saving Fixed Deposit: Tax-saving deposits are invested for a lock-in period of 5 years. Under Sec 80 C, you can earn tax deductions up to ₹ 1.50 Lakh in a financial year on these deposits. Unlike regular fixed deposits, investment in these FD is made as a lump-sum payment.
  • Senior Citizens Fixed Deposit: Individuals above the age of 60 can invest in senior citizens fixed deposit. The rate of interest on these deposits is higher than a regular fixed deposit.
  • Flexi Fixed Deposit: It is a special kind of fixed deposits which combines the features of savings or current account and fixed deposits. Using the auto- sweep facility, the excess funds automatically get transferred from the savings account to fixed deposits.

Who is eligible to open a Fixed Deposit online account?

The basic eligibility criteria across all FD providers is listed as follows:

  • Individual depositors above 18 years of age and having a PAN.
  • Hindu Undivided Family (H.U.F) with a separate PAN.
  • Minors (those below 18 years of age) under guardianship of a guardian more than 18 years old.

All depositors must satisfy RBI mandated KYC guidelines which include identity proof, age proof and address proof, among others.

List of Documents Required for Fixed Deposit

Below-mentioned is the list of documents one requires to open a fixed deposit:

  • Identity Proof: Passport, PAN card, Voter ID card, Driving licence, Government ID card, Photo ration card
  • Address Proof: Passport, Telephone bill, Electricity bill, Bank Statement with Cheque
  • Signature Proof: Passport, PAN card, Driving License

What are the Advantages of FD investment?

A fixed deposit is a risk-free investment instrument that offers assured returns at the end of maturity period. Here are some other advantages of investing in FD.

  • Flexibility: A fixed deposit offers a tenure ranging from 7 day to 10 years. Investors can thus choose short term, medium term or long tenure for investment.
  • Tax Benefits: Under Section 80 C of the Income Tax Act, investors can get tax exemption upto ₹ 1.50 Lakh on their investment.
  • Liquidity: One of the advantages of a fixed deposit is that it is easily convertible to cash. However, banks may charge a penalty for premature withdrawal.

Can I renew my FD account after its maturity?

On maturity, the customer may renew the bank deposit by contacting the branch. Customer can also place an auto renewal request with the bank for either the maturity amount or only the principal component (in which case the interest, subject to TDS, will get credited to the depositor’s bank account). However, the rate of interest on renewal of FDs will be as per the prevailing rate at the time of FD maturity.

Is Nomination facility available on Fixed Deposits?

Nomination facility is available for all FD account holders to add a nominee to whom they want to transfer the amount in the event of their death. Nomination can be made in favour of a single person only. A depositor can add a nominee in existing or new accounts.

  • All deposit accepting banks, NBFCs, HFC’s and corporates offer nomination facility.
  • Nominee is a person who claims the deposit upon the depositor's death.
  • Without a nominee, money in Fixed Deposit account will not be automatically transferred to the account-holder’s next of legal heirs and the claimants will need to establish their bonafide relationship with the bank.

Nominations can be changed or cancelled by the FD account holder.

Is Premature Withdrawal allowed on Fixed Deposit?

Very often depositors face a situation where they need urgent funds and may want to withdraw their fixed deposits before maturity. In common language this is known as breaking a FD. Banks usually levy a penalty at the time of premature withdrawal of FD either by paying lower interest rate on the deposit amount or deducting a penalty amount from the FD.

However, some banks including Yes Bank and Bank of Maharashtra waive off interest penalty on FD if the liquidation is due to some emergency. Some banks also offer the option of partial withdrawal from the fixed deposit account with some penalty.

Is FD Taxable?

FD is a taxable instrument. However, there are specific inclusions where one can save tax on FD by opting for a tax saving FD.

Tax Exemption on Principal Amount

Tax exemption on principal amount or amount deposited as FD is available if the investment has been made in a tax saving FD.

Income tax on interest on fixed deposit

Interest on FD is taxed at applicable tax rate to the depositor. Interest on FD is taxable on an accrual basis which means that even if the depositor will get FD maturity amount and interest at the time of FD maturity, he will pay tax on accrued interest on FD every year.

What is the revised TDS Rate 2021 for FDs?

In case the interest earned by you on fixed deposits with all branches of a bank in a year exceeds ₹ 40,000, your interest income is subject to 10% tax deduction at source (TDS). However, from 14th May 2020 onwards till March 2021, TDS rate has been revised and cut down to 7.5% with a view to provide relief to depositors in the current COVID’19 pandemic. Remember to quote your IT PAN when opening the term deposit, otherwise the bank will deduct TDS at twice the applicable rate. Also, you can claim credit for TDS exemption on FD only if your PAN is recorded with the bank.

Can I get a Loan against Fixed Deposit?

Banks offer facility of loan against FD to help depositors tide over temporary shortfalls in funds without the need of breaking their FDs and taking a loss in the form of lower interest or paying a penalty. Here are the features of Loan against FD:

  • Loan against FD can be availed only from the same bank at which the deposit is placed.
  • Most banks allow loans upto 90% of the value of the fixed deposit.
  • Tenure for loan has to be within the balance maturity of the deposit.
  • The interest rate on a loan against Fixed Deposit is usually 0.5% – 2% above the interest rate on the deposit. Loans against bank’s own deposits are exempt from base rate and hence can be offered below the bank’s base rate also.
  • Loan against Fixed Deposit can typically be availed even if the applicant has a poor credit history or CIBIL record and a low CIBIL score. Regular repayment of loan against FD may also help improve one’s CIBIL score.

Fixed Deposit Receipt

A fixed deposit receipt or FDR is a document handed over to the depositor by the bank or the financial institution when one books an FD with them. The receipt is proof and similar to how a bill is handed over at the end of a purchase. It contains information like name of the depositor, his or her age, principal amount, deposit tenure, date of booking the fixed deposit, maturity date, the interest rate and the terms and conditions on the FD. The FDR must be kept safely and securely by the depositor because it is required at the time of FD renewal, premature withdrawals and also if one needs loans against Fixed Deposits.

Compare Bank FD v/s NBFC FD v/s Corporate FD

Bank FD NBFC FD, HFC FD Corporate FD
Safety Highest Typically lower than banks Typically lower than banks
Credit rating Not required Mandatory Mandatory
Interest Rates Depends on the scale of banks. Lower for large banks but higher for small finance banks Higher than banks. Higher the credit rating, lower the rates and vice versa Higher than banks. Higher the credit rating, lower the rates and vice versa
FD Tenure Few days to 10 years 1 year to 5 years 1 year to 5 years
Maturity Options Non cumulative and cumulative Non cumulative and cumulative Non cumulative and cumulative
Coverage under DCGCI Yes, up to ₹ 5,00,000 lakh of deposits in all bank accounts No No
Security None None None
Loan against FD Available at 0.5 – 1.0% over FD rate May be available Not available
Flexi/ Sweep facility Offered by many banks Not available Not available
Frequency of interest compounding Quarterly May vary May vary
Tax deduction at Source (TDS) On interest income of more than ₹ 10,000/ - for a PAN in one bank across branches On interest income of more than ₹ 5,000/ - for a PAN On interest income of more than ₹ 5,000/ - for a PAN
Tax Benefit on FD Available on principal amount for 5 year tax saving deposits under Section 80-C None None
Nomination Facility Available Available Available
Employee FD’s > Available; slightly higher interest (upto 0.5%) may be offered Available; slightly higher interest (upto 0.5%) may be offered Available; slightly higher interest (upto 0.5%) may be offered
Special schemes for senior citizens 0.25% to 1.0% higher interest rates 0.25% to 1.0% higher interest rates 0.25% to 1.0% higher interest rates
Shareholder FD’s No extra benefit Slightly higher interest may be offered in some cases Slightly higher interest may be offered in some cases

What is Deposit Insurance?

Bank FDs are completely safe as retail deposits of up to ₹ 5 Lakh are covered by a guarantee by government through DICGC. Full form of DICGC is Deposit Insurance and Credit Guarantee Corporation which provides a guarantee known as DICGC guarantee on deposits of up to 5 lakh. The insurance limit on FDs have been increased and is expected to reduce the risk of small depositors.

It is important to understand the deposit insurance is available for banks and Small Finance Banks. However, deposit insurance is not applicable to NBFCs and HFCs. In the case of NBFCs and HFCs, it is advisable to invest in AAA rated or highly rated FDs only to reduce the risk on your savings.

Who can issue a fixed deposit?

A fixed deposit may be issued by any of the following entities:

  • Scheduled banks operating in India including public sector banks, private banks and foreign bank branches operating in India
  • Small Finance Banks
  • Deposit taking NBFCs permitted by the RBI to accept deposits
  • Housing Finance Companies regulated by the National Housing Bank
  • Public Sector Companies and Undertaking
  • Private Sector Companies
  • Cooperative banks

Latest News About FD

  • Avail Extra FD Interest Rate for Senior Citizen FD
    The Central bank of India is offering a 0.25 per cent increase in interest rates to encourage people to get vaccinated. The rates are offered on senior citizen FD.

FAQs

What does fixed deposit mean?

A fixed deposit is an investment or a savings options provided by financial institutions like Banks; wherein one can deposit their funds for a fixed period of time and thereby can earn a return on it in the form of pre-decided interests.

How does fixed deposit account work?

A fixed deposit works for the benefit of both the FD provider and holder. While the FD depositor deposits his or her funds in the bank, he or she earns interest on it provided the funds are deposited for a fixed period and not withdrawn before the fixed time. While investing in an FD, the investor has the option to choose the FD tenure as per his or her convenience. The tenure ranges from seven days to up to ten years. Each of these tenures has a pre-decide interest rate that will be provided on with the funds deposited.

Can I withdraw money from a fixed deposit?

Though fixed deposits are investments made for a fixed tenure, yet you can withdraw funds from it under special circumstances. Withdrawing funds prematurely will however lower the return you could otherwise earn on an FD, due to a reduction in interest rate.

What happens if you break FD before maturity?

Breaking an FD before the maturity period can cost the FD depositor a loss on the interest that he or she could otherwise earn on their FDs. Further, breaking FD prematurely can also lead one to pay the penalty for the same.

What is the penalty for breaking a fixed deposit?

The penalty for breaking a fixed deposit may vary across various banks. However, it usually ranges between 0.5% to 1%.

Can I withdraw FD online?

Yes, you can withdraw FD amount online before FD maturity but bank may levy a penalty by paying lower interest rate or charging a penalty for premature withdrawal.

Who are eligible to invest in FD schemes?

The following are eligible to invest in FD schemes- Resident Individuals, HUFs, NRIs, Firms, and Charitable Trusts, while others can apply for the scheme by submitting an offline application.

What are the documents required for opening FD?

The following documents are required for opening a Bank FD Account

  • Identity proof
  • Address proof
  • Signature proof
  • Age proof (for senior citizens)

What is the difference between RD or FD?

Recurring Deposit (RD) lets you deposit a certain amount each month in the account to earn interest on the invested sum for a specified tenure on a predetermined rate of interest. Whereas, Fixed Deposit (FD) is created by investing a lumpsum amount for a specified tenure on a predetermined rate of interest.

Can I redeem my fixed deposits before the original term?

Yes, an FD can be closed before its original term. If the FD is closed before completing the original term of the deposit, the interest will be paid as per the interest rate applicable on the date of deposit for the period it has remained with the bank. However, some banks may also levy a penalty prescribed by them on the date of deposit.

When can I renew my FD?

The person may renew his/her FD on maturity by submitting a duly filled FD Application Form, 15 days before the date of maturity, along with the old FD receipt with a revenue stamp of requisite value on it. However, your FD renewal will be subjected to the terms and conditions of the FD scheme as applicable to the maturity date of the old deposit.

Can I take a loan against fixed deposits?

Yes, many lenders provide the facility to take loans against fixed deposits. The bank generally provides loans on your FD up to the extent of 75-95%, depending upon the lender and loan tenure. Usually, loan against FDs is quick and cheap loans available to meet financial emergencies.

Can I opt for an auto-renewal facility while opening a FD?

Can I opt for an auto-renewal facility while opening a FD?

What is the maximum exemption that I can get under tax saver Fds?

Under tax saver FD, you are eligible for tax deduction under Section 80C of Income Tax for a maximum amount os ₹ 1,50,000 in a year.

What is tax saving FD?

The fixed deposit by investing in which you get tax deduction under Section 80C of the Income Tax is tax saving FD. The maximum deduction available is ₹ 1,50,000, with 5 years of the lock-in period.

How Can I Invest in FD?

There are various offline and online methods to invest in a fixed deposit. To open a fixed deposit account online, one can use modes such as the Internet or mobile banking. Investors can also invest in an FD by visiting a nearby bank branch or through ATMs and phone banking channels.


Our News - May 2021
  • 2021-04-30 : PNB Housing Finance posted ₹127-cr net profit in Q4
    PNB Housing Finance reported a consolidated net profit of Rs 127 crore in Q4 backed by retail loans like home, personal, LAP, two-wheeler, car, education and doctor loan along with deposits which include fixed and recurring deposits. Total income during January-March was down at Rs 1,834 crore from Rs 1,952 crore in the same period of 2019-20. Interest income dropped over 7% at Rs 1,670 crore during the quarter as against Rs 1,803 crore a year earlier.
  • 2021-04-30 : AU Small Finance Bank Q4 net profit up 38 per cent at Rs 169 cr
    AU Small Finance Bank reported a 38% hike in its net profit at Rs 168.98 crore for the last quarter of the fiscal ended March 2021. The profit was boosted by retail loans like home, personal, LAP, two-wheeler, car, education and doctor loan along with deposits which include fixed and recurring deposits. Total income during Q4 FY21 rose to Rs 1,569 crore as against Rs 1,366.60 crore. Interest income moved up to Rs 1,292.37 crore during the reported quarter from Rs 1,183.45 crore in the year-ago period.
  • 2021-04-30 : Bajaj Finance Q4 profit hiked by 42% to Rs 1,347
    Bajaj Finance reported a 42% year-on-year (YoY) increase in the March quarter profit at Rs 1,347 crore on April 27, supported by a decline in the loan loss provisions and growth in deposits which includes fixed and recurring deposits. Profit in the same quarter of the previous year was Rs 948.1 crore.
  • 2021-04-28 : Karnataka Bank targetting a growth of 12% in FY22
    Karnataka Bank stated that it is targeting to grow its business at 12% to over Rs 1.42 lakh crore in the current fiscal year. The Bank is planning to gradually increase the share of the retail loan which includes home, personal, LAP, two-wheeler, car, education and doctor loan.
  • 2021-04-27 : Bank credit increased by 5.33%; deposit rose 10.94%
    Reserve Bank of India reported that Bank credit which includes retail loans like home, LAP, personal, two-wheeler, car, education and doctor loan along with business and mudra loan grew by 5.33% to Rs 108.89 lakh crore. Further deposits which include fixed and recurring deposits rose 10.94% to Rs 152.15 lakh crore.
*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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