Fixed Deposit is an investment scheme offered to its customers by banks and non-banking financial Institute companies (NBFC-NBFI). In an FD, people invest a certain amount of money for a fixed period with a predetermined interest rate.

The interest rate varies from a financial institution to a financial institution, although it is usually higher than the savings accounts interest.

Different periods of fixed deposits ranging from concise 7-14 days to long ten years. Dispositions are available. Sometimes a fixed deposit is called a term deposit.




How Does An FD Account Work?

You lock the amount for a fixed period when you put your money into fixed deposits. The principal amount can be earned cumulatively throughout the tenure. After each particular interval, interest earned is added to the capital amount.

Given the flexibility of tenures, you can manage several FD accounts distributed over different assignments. You can gain more from your investments in that way. Additional rates are usually 0.25% to 0.65% more than the current rate, eligible for the elderly.

Furthermore, NRIs can also open FD accounts in India. FD accounts may even open in India by NRI as NRE (Non-Resident External) and NRO (Non-Resident Ordinary).

You can open a deposit account with a bank with a savings account already in place. Some banks allow you to open an FD account, even without a savings bank account. You must, however, go through a KYC process with such banks where you must submit documents, such as ID evidence, address proof, passport size photographs, etc.

Fixed Deposits:

Fixed deposits are long-term deposits of high-interest rates and are offered by Indian banks. Fixed deposits are the most popular method of term deposits, whereas other term deposits are recurring deposits and fixed Flexi deposits [citation necessary].

FDs provide higher interest rates than savings accounts to make up for the low liquidity.
[quote necessary] For FDs, the most extended allowed duration is ten years. In general, the longer the deposit duration, the greater the interest rate, but a bank can provide the lower interest rate for a more extended period if the central bank of a nation expects to lend interest rates.

In India, usually, interest is paid on FDs every three months after the date of the deposit (e.g., the first interest payment would be spent on 15 May if FD a/c was opened on 15 February). The interest is credited to or sent by check to the customers’ Savings bank account. It’s an easy FD.

The client can reinvest the interest in the FD account. In this case, the cumulative FD or compound interest is referred to as the FD. The interest is paid for those deposits with the amount invested at the expiry of the deposit.
While banks can refuse to pay FDs before the deposit expires, they usually refuse. This is called early retirement. In such cases, interest shall be paid at the rate applicable when the withdrawal takes place. For example, a 5-year deposit of 8 percent is made but after two years is withdrawn. If the 2-year rate applicable on the date of deposit is 5%, the interest is paid at 5%. For premature withdrawal, banks may charge a penalty.

Banks provide each FD with a separate receipt as each deposit is treated as a separate contract. The Fixed Deposit Receipt (FDR) is the receipt that must be returned to the bank upon renewal or encounter.

Many banks offer an automated FD renewal facility in which the clients give new instructions for a matured deposit. These deposits will be renewed at the renewal date for a similar term to that of the original deposit on maturity.
The regulations on income tax require that the expiry date of FD shall not be paid cash above Rs 20,000. The payment shall be made either by “A/c pay” on the customer’s name-crossed check or by credit to the customer settlement bank a/c or current a/c.

Banks now have Flexi’s facilities or FDs, where customers can withdraw their money via ATM by checking or transferring funds from their FD accounts. In such cases, any interest accrued from the amount withdrawn will be credited to their savings account, and the balance will be converted into their new FD automatically. In case of an emergency, this system enables you to get your funds quickly out of your FD account.


Customers can use FD loans up to 80 to 90% of the deposit value. The interest rate on a loan could range from 1 to 2% compared to the deposit rate.
Indians may open these accounts for at least seven days.
Customers earn a higher interest rate than depositing money in a saving account by investing in a fixed deposit.
Fixed deposits for tax savings are fixed deposits that enable the investor to save tax according to Article 80C of the Revenue Tax Act.


In India, banks pay tax on FDs if, in a financial year, interest paid in a bank exceeds ten thousand to a customer. This applies to interest paid or reinvested per client. The tax at source is known as a deduction and currently amounts to 10% of interest. With CBS banks, the FD holding of a customer can be recognized through various branches. Banks issue Form 16 A to the client as a tax receipt deducted at the source every quarter.

However, the fixed deposit interest tax does not apply to 10%; it applies to the deposit holder’s tax slab rate. If a fixed interest tax is owed after TDS, the holder is expected to declare that tax in return for the income tax and pay that tax on its own.

Where total revenue for one year is within overall taxable limits, the customer may submit to the bank, at the commencement of the FD and the beginning of any financial year, a Form 15 G (less than 60 years) or Form 15 H (above 60 years).