What is Fixed Deposit (FD)?

A Fixed Deposit (FD) is a savings product offered by banks and NBFCs where you invest a lump sum for a fixed period at a fixed rate of interest. At maturity, you get back the principal plus the interest earned. FDs are one of the most popular low-risk investment options in India.

How Does a Fixed Deposit Work?

When you open an FD, you deposit a one-time amount (principal) for a chosen tenure—ranging from 7 days to 10 years in most banks. Interest can be paid at maturity (cumulative FD) or monthly/quarterly (payout FDs). In a cumulative FD, interest is compounded typically quarterly and paid at maturity.

Benefits of Fixed Deposits

Safety: FDs up to ₹5 lakh per depositor per bank are insured by DICGC.
Predictable returns: You know the exact maturity amount at the time of investment.
Flexible tenures: From a few days to 10 years.

How FD Interest is Calculated

Most banks in India use quarterly compounding. You can use our FD calculator, FD maturity calculator, and compound interest calculator.

Tax on FD Interest

FD interest is taxable under "Income from Other Sources". TDS may apply if interest exceeds ₹40,000 (₹50,000 for seniors). Use our FD tax calculator. See tax on FD interest.

Related tools

A 60-second history of the FD in India

The fixed deposit as we know it today became standard at Indian banks in the 1960s, after the nationalisation drive that absorbed most large private banks into government control. For two generations of Indian households, the FD was the default savings instrument alongside the post-office NSC and the gold locker. Even today, RBI data shows that more than half of all household financial savings sit in bank deposits — far more than in mutual funds, equity, or insurance.

Mechanically, an FD is a contract for a specified sum, at a specified rate, for a specified tenure. The bank is committing to pay you that rate even if interest rates across the economy collapse during your tenure (a real risk in a falling-rate cycle). That guarantee is what you are paying for when you accept a slightly lower yield than a well-managed debt mutual fund.

Worked example: a typical household FD

Principal: ₹1,50,000
Annual rate: 7.00%
Tenure: 2 years
Maturity (quarterly compounding): ₹1,72,288
Interest earned: ₹22,288

A ₹1.5 lakh, 2-year FD is the most common size in retail banking — it is the typical parking spot for a Diwali bonus or a small insurance maturity that the family does not want to spend immediately.