Banks in India independently determine term deposit rates (with RBI's board approval), typically offering 6 – 7 % per annum for tenures exceeding 1 year; senior citizens and large deposits may attract a marginally higher rate.
A Fixed Deposit (FD), also known as a time deposit, is a secure investment offered by banks for a predetermined term, typically ranging from 7 days to 10 years. Depositors lock in a lump sum at the outset and receive interest at a fixed rate. At maturity, they receive the principal plus interest. FD providers may permit premature withdrawals, but these incur interest penalties and may pay only applicable short-term rates.
FDs can be cumulative (interest reinvested) or non‑cumulative (periodic interest payouts) and often allow loans against the deposit value.
Bank FDs are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to ₹5,00,000 per bank, offering safety.
These are the standard term deposits for Indian residents and NRO accounts, with tenures from 7 days to 10 years. Interest rates are at the discretion of the FD provider, subject to board or ALCO approval. Banks often provide slightly higher interest for senior citizens.
Designed for NRIs, these rupee-denominated accounts require a minimum tenure of 1 year, extendable up to 3 or more years, but rates for longer tenures cannot exceed those of 3-year deposits. Interest earned is fully repatriable and tax-free in India.
These accommodate Indian and repatriable earnings. The rate structure aligns with domestic FDs, with applicable tax deductions.
These are held in foreign currency, with tenures of 1 to 5 years. Interest rates are linked to international benchmarks (e.g. LIBOR) plus bank margin. Both principal and interest are freely repatriable and not subject to Indian currency risk.
RBI permits reinvestment, where interest is rolled over into the principal at maturity under the same rate terms.
Some banks cater to senior citizens above 80 years of age, (“super-seniors”) offering higher interest and automatic nominee transfers.
As per RBI data, term deposits exceeding 1 year currently yield between approximately 6 % and 7.25 % as of July 7, 2025, depending on the bank’s policy. Senior citizens may receive an additional 0.25–0.75 % premium. NRI FDs (NRE/NRO) are deregulated and generally align with domestic rates. FCNR(B) rates for foreign currency FDs depend on international benchmarks like LIBOR plus a margin.
Specialised schemes (e.g. super‑senior FDs) may offer higher yields within fixed-tenure frameworks.
To open an FD, the depositor must provide:
Most FDs permit premature withdrawal after the minimum tenor, typically 7 days, but might attract penal interest rates. Bulk deposits (₹1 crore+) may have bank-defined restrictions or no late withdrawals. Special term FDs with lock‑in (300 days–5 years) must adhere to rigid withdrawal terms, including no interest if exited during the lock‑in period. NRE-to-RFC conversions within a year incur no penalty, but banks may pay only savings‑rate interest.
Fixed Deposits deliver assured returns with minimal risk, protected up to ₹5,00,000 by DICGC. They offer flexible tenures, liquidity (via loans), and steady income, for conservative investors. Senior citizens gain slightly higher yields. FDs enhance portfolio stability and complement equity and bond exposures by safeguarding capital and ensuring discipline in savings.
FDs offer modest returns that may not outpace inflation. Premature withdrawal penalties reduce flexibility. Interest income is taxable at the depositor’s slab rate, with TDS on interest above ₹10,000, reducing net post‑tax yield.
FDs might be suitable for risk‑averse individuals seeking safe and predictable returns. Senior citizens benefit from regular income and slight rate boosts. The are for saving toward specific short‑ to medium‑term goals (like a holiday or children's education) and for portfolio diversification, especially when interest rates are favourable relative to inflation.
Interest from FDs is taxed under “Income from Other Sources” according to the investor’s applicable income‑tax slab. Banks deduct TDS at 10% if aggregate interest paid exceeds ₹10,000 in a fiscal year. Depositors receive Form 16A and can view details in Form 26AS. To avoid or reduce TDS, residents below 60 can submit Form 15G and seniors (≥60) Form 15H, if total income is below taxable thresholds.
Advance tax is require d if net tax after TDS exceeds ₹10,000, payable quarterly. Senior citizens are eligible for a deduction of up to ₹50,000 under section 80TTB, while others may claim ₹10,000 under section 80TTA on savings interest only. FDs held by trusts or HUFs follow standard taxation rules, with interest disclosed in ITR‑7 or applicable forms.
