What is a Fixed Deposit?
A Fixed Deposit (FD) is a financial instrument offered by banks and post offices where you deposit a lump sum for a fixed tenure at a fixed interest rate. The interest rate is locked at booking, so FDs are popular with conservative investors who want predictable returns. Tenures range from 7 days to 10 years, and the interest can be paid out monthly/quarterly or compounded until maturity.
How is FD Interest Calculated?
For quarterly compounding (the most common in India), the formula is M = P × (1 + r/4)4t, where P is the principal, r is the annual interest rate (as a decimal), and t is the tenure in years. For example, ₹1,00,000 at 7.5% for 3 years with quarterly compounding works out to roughly ₹1,24,397 at maturity. Our calculator handles simple, quarterly, and monthly compounding so you can compare.
Bank FDs vs. Company FDs vs. Post Office FDs
Bank FDs are the safest (DICGC-insured up to ₹5 lakh per bank per depositor), with rates around 7-8% for regular deposits. Post office FDs (5-year tenure) currently offer 7.5% and are government-backed. Company FDs can offer 8-9% but carry credit risk — they're not bank-insured. For most investors, a mix of bank FDs across 2-3 banks (to maximize DICGC coverage) is the safest approach.
Senior Citizen FD Benefits
Most banks offer an additional 0.5% interest rate for senior citizens (60+ years). On a 5-year FD of ₹5 lakh, this can mean ₹15,000-25,000 more over the tenure compared to a regular deposit. Senior citizens also get higher TDS thresholds (₹50,000 vs. ₹40,000 interest per branch per year before TDS applies).
Premature Withdrawal and Loan Against FD
Most FDs allow premature withdrawal, though banks typically apply a 0.5-1% penalty on the contracted interest rate. An alternative is to take a loan against your FD — usually up to 90% of the deposit value at 1-2% above the FD rate, without breaking the FD itself. This is useful for short-term funding needs while keeping the FD intact.