What is a Fixed Deposit (FD)?

A Fixed Deposit (FD) is a financial instrument provided by banks and NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It is considered one of the safest investment options in India.

How FD Calculator Works? (Compounding Secret)

Most people think FD works on Simple Interest. It does not.

In India, most banks (like SBI, HDFC, ICICI) use Quarterly Compounding. This means your interest earns interest every 3 months. Our calculator uses this accurate formula by default, unlike generic calculators that use annual compounding.

Formula used: A = P × (1 + r/n)^n×t
Where n = 4 for Quarterly Compounding.

Taxation on Fixed Deposits (TDS Rules 2026)

Interest earned on FD is fully taxable as per your Income Tax Slab. However, banks deduct TDS (Tax Deducted at Source) under certain conditions:

Note: If you do not provide PAN Card, TDS is deducted at 20%.

Types of Fixed Deposits

• Standard FD: Lock money for 7 days to 10 years. Liquidity is available (with penalty).
• Tax-Saver FD: Lock-in for 5 years. Eligible for tax deduction under Section 80C (up to ₹1.5 Lakh). You cannot withdraw before 5 years.
• Senior Citizen FD: Offers 0.50% extra interest rate over standard rates.
• Flexi FD: Linked to your savings account. Excess money automatically moves to FD, and moves back when you issue a cheque.

Is FD 100% Safe?

Yes, FDs in scheduled banks are insured up to ₹5 Lakh (Principal + Interest) by DICGC (a subsidiary of RBI). This makes them extremely safe.

What is the penalty for breaking FD?

If you withdraw money before maturity (Premature Withdrawal), banks usually deduct 0.5% to 1% from the effective interest rate as a penalty.