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+91-9797971876What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is a form of investment offered by banks and financial institutions. If you have money you don’t need right away, like your savings, you can put it in an FD instead of keeping it idle in a regular savings account. FDs are a popular choice in India because they offer a safe and predictable way to grow your wealth.
Opening an FD is a straightforward process and can be done online as well as offline.
How does a Fixed Deposit (FD) work?
A Fixed Deposit (FD) works by depositing a sum of money with a bank or financial institution for a predetermined period, ranging from months to years. During this period, you receive a fixed rate of interest on your deposit which is higher than what you would normally receive in case of a regular savings account.
Let us understand how a fixed deposit works with the help of an example. But first, here are the formulae to calculate the FD maturity amount:
Simple Interest Calculator
M = P + (P × r × t/100), where –
- P is the principal amount that you deposit
- r is the rate of interest per annum
- t is the tenure in years
Suppose, you deposit INR 10,000 for 2 years at a 5% interest rate. Now, according to the formulae -
M = 10,000 + (10000 × 5 × 2/100);
So, M = 11,000
Compound Interest Calculator
M= P + P {(1 + i/100) t – 1}, where –
- P is the principal amount
- i is the rate of interest per period
- t is the tenure
Now, with the same values discussed above, we will calculate the compound interest,
M = 10000+ 10000 {(1 + 5/100) 2 – 1}
So, M = 11,025
How to Calculate FD Interest Rate?
To calculate the fixed deposit (FD) interest rate, use InvestKraft’s FD Calculator. Here are the simple steps to calculate the interest on your FD deposit:
- Select the total investment amount
- Select the investment frequency (yearly/monthly) and investment period
- Select the interest rate and click on “Invest Now”
To calculate interest earned on mutual funds, SIP, RD, etc. click here
FD Rates Offered by Top Banks in India, 2024
Here’s a list of the latest interest rates offered by the top banks in India, as of 2024, for terms ranging from 7 days to 10 years:
| Bank | General Public Interest Rates p.a. | Senior Citizen Interest Rates p.a. |
| Axis Bank | 3.00% to 7.40% | 3.50% to 7.90% |
| Bandhan Bank | 3.00% to 7.85% | 3.75% to 8.35% |
| Bank of Baroda | 4.25% to 7.25% | 4.75% to 7.75% |
| Canara Bank | 4.00% to 7.45% | 4.00% to 7.98% |
| Central Bank of India | 3.50% to 6.75% | 4.00% to 7.25% |
| HDFC Bank | 3.00% to 7.25% | 3.50% to 7.75% |
| ICICI Bank | 3.00% to 7.10% | 3.50% to 7.65% |
| IDBI Bank | 3.00% to 7.00% | 3.50% to 7.50% |
| IDFC FIRST Bank | 3.00% to 7.75% | 3.50% to 8.25% |
| IndusInd Bank | 3.50% to 7.75% | 4.00% to 8.25% |
| Karnataka Bank | 3.50% to 7.25% | 3.90% to 7.65% |
| Kotak Mahindra Bank | 2.75% to 7.61% | 3.25% to 8.14% |
| Punjab National Bank | 3.50% to 7.25% | 4.00% to 7.75% |
| RBL Bank | 3.50% to 8.10% | 4.00% to 8.60% |
| SBM Bank India | 4.25% to 7.75% | 4.75% to 8.25% |
| South Indian Bank | 2.90% to 7.40% | 3.40% to 7.90% |
| State Bank of India | 3.50% to 7.00% | 4.00% to 7.50% |
| Tamilnad Mercantile Bank | 5.25% to 7.75% | 5.25% to 8.25% |
| UCO Bank | 2.90% to 6.50% | 3.15% to 7.00% |
| Union Bank of India | 3.50% to 7.25% | 3.50% to 7.75% |
| YES Bank | 3.25% to 7.98% | 3.75% to 8.51% |
What are the benefits of a Fixed Deposit (FD)?
Here are some benefits of a Fixed Deposit (FD):
- Guaranteed Returns: One of the main reasons why many people opt for an FD is the assurance of a fixed rate of interest it provides.
- Tax Benefits: Banks do not deduct tax on interest earned until it reaches a certain threshold limit. This is helpful for small depositors since it reduces their tax burden.
- Flexible Duration: You have the full freedom to choose your FD’s duration, within the bank’s minimum tenure rules. You can withdraw the deposit or extend it as per your preference.
- Emergency Funds: FDs serve as a reliable source of emergency funds. You can easily obtain a loan against your FD, with some banks offering as much as 95% of the deposit amount.
- Easy Access to Funds: They can be easily liquidated through an online process as prescribed by your bank or by visiting your bank branch offline and filling out a form for funds withdrawal.
- Better Rate of Interest than Savings: Interest rates offered by banks on fixed deposits are significantly higher than what they offer on the maintained balance in the savings account.
- Preservation of Capital: In FDs, the principal amount (initial investment amount) stays intact and after maturity, the interest is added to the principal amount.
- Regular Source of Income: Banks roll out the interest to FDs on a monthly, quarterly and annual basis, thus making it a source of regular income for senior citizens (retired people included).
- Not Dependant on the Market: FDs are not affected by the market volatility and fluctuations which gives a sense of independence and security to the depositors.
FAQs on Fixed Deposit (FD)
A. FD schemes generally come with a duration of 7 days to 10 years, and the interest rates are generally higher for the longer tenures.
A. Tax-saving FDs come with a lock-in period of 5 years.
A. All resident individuals, partnerships, governments, local bodies, HUFs, private and public limited companies, and societies are eligible to invest in a fixed deposit in India.
A. Yes, it is mandatory to pay tax on an FD’s interest. However, under Section 80C of the Income Tax Act, 1961, you are allowed for a deduction up to Rs.1.5 lakh per financial year.
A. Yes, it is a mandatory requirement to submit your PAN for opening an FD. However, if you do not have a PAN, you can submit Form 60/61 (in case you are not a company or a firm).
The minimum amount required to open a fixed deposit varies from bank to bank. Some private banks allow a minimum deposit between INR 5,000 to 10,000 to open a fixed deposit. On the other hand, some public sector banks require as low as INR 1000 to open a fixed deposit account. Before opening a fixed deposit account, you must speak to your bank representative about the minimum amount and terms and conditions.
Yes, every FD has a lock-in period. The term “lock-in” period is also known as deposit tenure or maturity period. Banks offer lock-in options from 7 days to 10 years except 5 years for “tax-saving” FDs or special FDs. The lock-in period of an FD is defined as the time for which the invested principal amount cannot be withdrawn.
As discussed above, if you decide to withdraw your invested principal amount from a fixed deposit (or break your FD), you will not be eligible for the promised interest. Usually, banks charge somewhere between 0.5% to 1% as a penalty for premature withdrawal of an FD. However, some banks offer premature withdrawal facilities with no penalty charges.
The penalty rate also depends on the lock-in period you have opted for your fixed deposit.
Those who are looking for a risk-free investment opportunity that offers a fixed return and tax benefits should invest in a fixed deposit. FDs offer secure and hassle-free investment opportunities for those who are okay with locking their money for a certain period.
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