Question 1

What is a Fixed Deposit (FD)?

Accepted Answer

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.

Question 2

How is FD interest calculated?

Accepted Answer

FD interest can be calculated using Simple Interest or Compound Interest formulas depending on the tenure and payout option. Most banks compound interest quarterly. Our calculator uses the compound interest formula for accurate results.

Question 3

Is FD interest taxable?

Accepted Answer

Yes, interest earned on Fixed Deposits is fully taxable as per your income tax slab. Banks also deduct TDS (Tax Deducted at Source) if the interest income exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year.

Question 4

Can I withdraw FD before maturity?

Accepted Answer

Yes, premature withdrawal is allowed by most banks, but it usually attracts a penalty (typically 0.5% to 1% lower interest rate).

Question 5

Is FD safe?

Accepted Answer

Bank FDs are considered very safe. In India, deposits in scheduled banks are insured up to ₹5 Lakhs by DICGC (Deposit Insurance and Credit Guarantee Corporation).

Question 6

What is the minimum tenure for FD?

Accepted Answer

The minimum tenure for a bank FD is usually 7 days.

Question 7

What is the maximum tenure for FD?

Accepted Answer

The maximum tenure is typically 10 years.

Question 8

Do senior citizens get extra interest?

Accepted Answer

Yes, most banks offer an additional interest rate of 0.50% to 0.75% to senior citizens (above 60 years).

Question 9

What is a Tax-Saver FD?

Accepted Answer

A Tax-Saver FD has a mandatory lock-in period of 5 years and offers tax deduction under Section 80C of the Income Tax Act (up to ₹1.5 Lakhs per year).

Question 10

Can I take a loan against FD?

Accepted Answer

Yes, you can avail a loan or overdraft facility against your FD, typically up to 90% of the deposit amount, at an interest rate 1-2% higher than the FD rate.

Question 11

What is the difference between Cumulative and Non-Cumulative FD?

Accepted Answer

In Cumulative FD, interest is reinvested and paid at maturity (compounding benefit). In Non-Cumulative FD, interest is paid out regularly (monthly/quarterly/yearly).

Question 12

How often is FD interest compounded?

Accepted Answer

In India, FD interest is typically compounded quarterly (every 3 months).

Question 13

What is TDS on FD?

Accepted Answer

TDS (Tax Deducted at Source) is deducted by the bank at 10% if interest income exceeds ₹40,000/year (₹50,000 for seniors). If PAN is not submitted, TDS is 20%.

Question 14

Can I avoid TDS on FD?

Accepted Answer

Yes, if your total income is below the taxable limit, you can submit Form 15G (for individuals <60) or Form 15H (for seniors >60) to the bank to avoid TDS deduction.

Question 15

What happens if the bank fails?

Accepted Answer

Under the DICGC Act, each depositor in a bank is insured up to a maximum of ₹5,00,000 for both principal and interest amount held in the same capacity and same right.

Question 16

Can I open an FD online?

Accepted Answer

Yes, most banks allow you to open an FD instantly through their internet banking or mobile app.

Question 17

Is FD better than RD?

Accepted Answer

FD is for lump sum investment, while RD is for regular monthly savings. Both offer similar interest rates and safety. Choose based on whether you have a lump sum or want to save monthly.

Question 18

Can I add money to an existing FD?

Accepted Answer

No, you cannot add money to an existing FD. You will have to open a new FD for the additional amount.

Question 19

What is the penalty for premature withdrawal?

Accepted Answer

Banks typically charge a penalty of 0.5% to 1% on the applicable interest rate for the period the deposit remained with the bank.

Question 20

How to choose the best FD?

Accepted Answer

Compare interest rates across banks (including Small Finance Banks which often offer higher rates), check the bank's safety/rating, and choose a tenure that aligns with your liquidity needs.

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