FD Calculator

What Is a Fixed Deposit (FD)? — Complete Guide for 2026

A Fixed Deposit (FD) — also called a Term Deposit — is a financial instrument offered by scheduled commercial banks, small finance banks (SFBs), post offices, and non-banking financial companies (NBFCs). You invest a lump sum for a pre-determined tenure at a fixed interest rate that is locked on the day of booking. Unlike your savings account, the FD rate does not change with RBI rate decisions after you book it.

In 2026, FDs are one of the most widely used investment instruments in India, with an estimated ₹220 lakh crore in bank fixed deposits across the country. While equity markets command attention with their headline returns, FDs form the backbone of the risk-averse segment of nearly every Indian household's portfolio — for good reason. They offer predictability, safety (up to DICGC limits), liquidity through premature withdrawal, and now reasonably competitive rates following the RBI rate hike cycle of 2022–2024.

The RBI repo rate directly influences FD rates. When the RBI raises the repo rate, banks gradually pass on higher rates to FD customers — and vice versa. As of 2026, the RBI has shifted to an easing bias after a prolonged pause, meaning FD rates may trend slightly lower going forward. Investors locking into FDs now — especially at small finance banks — are catching near-peak rates before any significant cuts materialise. Use our FD calculator above to model your exact maturity amount under different scenarios.

How Is FD Interest Calculated? The Compound Interest Formula

Banks calculate FD returns using the compound interest formula. The compounding frequency — quarterly, monthly, or annually — determines how quickly interest earns interest on itself. Most Indian banks compound quarterly by default.

Compounding frequencies explained

Quarterly (n=4) — Standard for most bank FDs. Interest earned each quarter is added to the principal, and next quarter's interest is calculated on the higher balance. Monthly (n=12) — Slightly better than quarterly; used by some banks and NBFCs for non-cumulative payout options. Annual (n=1) — Simplest, yields the lowest total return for the same nominal rate. For FDs below one year, interest is typically calculated on a simple basis or pro-rated.

Worked example — quarterly compounding

Cumulative vs Non-Cumulative FD — which is better?

Cumulative FD: Interest is not paid out periodically. Instead, it is reinvested at the same FD rate every compounding period (quarterly or monthly). The total payout — principal + compound interest — is made only at maturity. This gives the highest total return and is ideal for wealth accumulation goals. Recommended for salaried investors, NRIs, and anyone who does not need regular income from their investment.

Non-Cumulative FD (Payout FD): Interest is credited to your linked savings account at fixed intervals — monthly or quarterly. Since interest is not reinvested, the total payout over the tenure is lower than the cumulative equivalent. However, it provides a predictable, regular income stream. This is the preferred choice for retirees, pensioners, and those using FD interest to fund monthly expenses.

For a ₹10 lakh FD at 7.5% for 3 years: Cumulative yields approximately ₹12,51,480 at maturity, while a non-cumulative (quarterly payout) yields roughly ₹11,87,500 in total payouts. The difference of about ₹63,980 over 3 years is the cost of opting for convenience of periodic income.

Best FD Interest Rates in India — 2026

FD rates vary significantly by institution type, tenure slab, deposit amount, and depositor category. Senior citizens (aged 60 and above) receive an additional 0.25% to 0.75% (typically 0.5%) over regular rates at most banks — a benefit mandated by RBI guidelines. Rates below are indicative for 2026 and apply to deposits below ₹2 crore (retail FD category):

⚠️ Rates shown are indicative for 2026 and change frequently. Always verify the current rate on the institution's official website before booking. Rates differ by tenure, deposit amount (≤₹2 crore vs bulk), and customer category (resident / NRO / NRE).

FD Laddering Strategy — Maximise Returns and Liquidity

Rather than locking your entire corpus in a single long-term FD, consider FD laddering: split your investment across 3–5 FDs with staggered maturities. For example, if you have ₹10 lakh to invest:

• ₹2 lakh in a 1-year FD (liquidity layer)
• ₹2 lakh in a 2-year FD
• ₹2 lakh in a 3-year FD
• ₹2 lakh in a 4-year FD
• ₹2 lakh in a 5-year FD (highest rate + potential 80C benefit under old regime)

As each FD matures annually, you either reinvest at the prevailing best rate or use the funds if needed. This strategy minimises reinvestment risk, avoids premature withdrawal penalties, and ensures you always have a tranche maturing within 12 months for emergencies.

TDS on FD Interest — FY 2026–2027 Rules & Thresholds

TDS (Tax Deducted at Source) on FD interest is governed by Section 194A of the Income Tax Act. The bank acts as a tax collector on behalf of the government — deducting TDS from your interest before crediting it to your account. Many depositors wrongly treat TDS as the final tax on FD income. It is not — it is an advance tax.

TDS thresholds at a glance — FY 2026–2027

TDS vs Actual Tax — Understanding the Difference

TDS is an advance tax, not the final tax. Your actual liability depends on your total income and which tax regime you have opted for this year:

• 0% slab (income below ₹3 lakh — new regime / ₹2.5 lakh — old regime): You owe zero tax. File ITR and claim full TDS refund.
• 5% slab: Bank deducted 10% TDS but you owe only 5%. Claim 5% refund when filing ITR.
• 20% slab: Bank deducted 10%. You owe 20%. Pay remaining 10% as self-assessment tax with ITR.
• 30% slab: Bank deducted 10%. You owe 30%. Pay remaining 20% as self-assessment tax — this is often missed, leading to notices.

How to Avoid or Reduce TDS on FD — 2026

FD Taxation under New vs Old Tax Regime — FY 2026–2027

FD vs Other Safe Investments — 2026 Comparison

FDs compete with several alternatives for the "safe money" portion of a portfolio. Here is a clear, honest comparison — including post-tax effective returns for a 30% bracket investor:

The honest verdict: For a 30% bracket investor, a PPF at 7.1% (tax-free) is mathematically better than a bank FD at 8% (post-tax return ~5.6%), if you can afford the 15-year lock-in. SCSS at 8.2% with 80C benefit (old regime) is the best combination of safety, rate, and tax efficiency for senior citizens. FDs win when you need complete tenure flexibility (7 days to 10 years), pledge-ability for loans, and no lock-in whatsoever.

FD vs Savings Account — When to Park Money in FD

Savings account rates currently range from 2.5% (SBI, HDFC) to 7% (some SFBs). A short-term FD of even 7 days at a competitive bank will typically yield more than a savings account for the same tenure. However, the minimum FD tenure at most banks is 7 days, and premature withdrawal is not permitted within the first 7 days. For money you will need within a week, a savings account or liquid fund remains more practical.

A useful rule of thumb: any lump sum you will not need for more than 7 days should ideally be in an FD rather than a savings account — the difference in return is material over months and years. Use our compound interest calculator to model the difference between savings account and FD returns over any time horizon.

FD and Inflation — Understanding Real Returns

With India's CPI inflation running at 4–5% in 2026, an FD at 7.5% generates a nominal return of 7.5% — but a real (inflation-adjusted) return of only 2.5–3.5% before tax. After a 30% slab tax, the real post-tax return is practically 0–1%. This is the structural limitation of FDs as a long-term wealth creation tool — they preserve capital in real terms, but rarely grow it significantly. For wealth creation over 10+ years, FDs are best used as a stable, low-volatility component of a diversified portfolio — not as the entire strategy. Our SIP calculator can help you model equity-linked returns alongside your FD projection.

Is FD Safe? DICGC Insurance, Bank Risk, and Premature Withdrawal

DICGC Insurance — How Much Is Your FD Really Protected?

The Deposit Insurance and Credit Guarantee Corporation (DICGC) — a wholly owned subsidiary of the RBI — insures deposits (savings accounts + current accounts + FDs + RDs combined) at every scheduled commercial bank, small finance bank, payments bank, and cooperative bank in India. The coverage limit is ₹5 lakh per depositor per bank (principal + interest combined).

This means if your bank fails, you are guaranteed to receive up to ₹5 lakh within 90 days. Deposits above ₹5 lakh per bank are at risk. The practical implication: never keep more than ₹5 lakh (across all your accounts and FDs) in a single bank if you prioritise capital protection over convenience. DICGC insurance is free — banks pay the premium on your behalf.

Post Office Time Deposits (POTD) carry a full sovereign guarantee with no upper limit — making them the safest option in India for large deposits. NBFC FDs are not covered by DICGC — they carry credit risk. Only invest in NBFCs with a minimum AAA or AA+ credit rating (CRISIL / ICRA), and keep amounts moderate relative to your portfolio.

What Happens If You Break an FD Prematurely?

Premature withdrawal penalty: Typically 0.5% to 1% reduction from the rate applicable for the tenure the FD was actually held. Banks do not allow withdrawal before 7 days from booking.

Alternative to breaking FD: Most banks offer a loan against FD (overdraft facility) — borrow 75–90% of the FD value at 1–2% above your FD rate. Since your FD continues to earn interest at 7.5%, the net effective borrowing cost is only 1–2%. This is far cheaper than a personal loan (12–20%) and avoids breaking the FD. Ideal for short-term cash needs. Explore this option on our loan calculator to model the cost comparison.

FD Auto-Renewal — What to Watch Out For

Many banks auto-renew matured FDs at the current rate if you do not provide specific instructions. While convenient, this means: (a) your FD may renew at a lower rate if rates have fallen since booking, and (b) the new TDS cycle restarts. Always set a calendar reminder 2–3 weeks before your FD matures to review whether renewal, reinvestment elsewhere, or partial withdrawal makes the most sense.

How to Open an FD Online in India

1. Log in to your bank's net banking or mobile app. Most banks allow FD booking 24×7 online.
2. Navigate to "Fixed Deposits" or "Term Deposits" and select "Open New FD."
3. Enter the principal amount, choose tenure, and select cumulative or non-cumulative payout.
4. Review the displayed interest rate and maturity amount (use our FD calculator above to cross-check).
5. Confirm the linked savings account for debit (principal) and credit (maturity proceeds).
6. Submit — the FD is booked instantly and a confirmation with the FD receipt number is sent to your registered mobile/email.

Senior Citizen FD Benefits — 2026

Senior citizens (aged 60 and above) enjoy a significantly more favourable FD ecosystem in India. Here is a complete summary of benefits for 2026:

Related Financial Calculators on ClariMoney

Use these free calculators to build a complete picture of your finances alongside your FD planning:

Fixed Deposit — Frequently Asked Questions (2026)

• What is a Fixed Deposit (FD)? ▼
  A Fixed Deposit (FD), also called a Term Deposit, is a financial product offered by banks, post offices, and NBFCs where you deposit a lump sum for a fixed tenure at a pre-agreed interest rate. The rate is locked on the day of booking, meaning it does not change with market conditions. At maturity, you receive your principal plus compounded interest. FDs are one of the safest investments in India — deposits at scheduled banks are insured by DICGC up to ₹5 lakh per depositor per bank.
• Is FD interest taxable in FY 2026–2027? ▼
  Yes — FD interest is fully taxable as "Income from Other Sources" under both the old and new tax regimes in FY 2026–2027. It is added to your total income and taxed at your applicable slab rate (5%, 20%, or 30%). The bank deducts TDS at 10% (with PAN) if interest crosses the threshold, but your final tax obligation is based on your actual slab rate. If you are in the 30% bracket, you must pay the remaining 20% when filing your ITR.
• What is the TDS limit on FD interest in FY 2026–2027? ▼
  As per Budget 2025, the TDS threshold on bank FD interest for FY 2026–2027 is: ₹50,000 per year per bank for regular citizens (raised from ₹40,000), and ₹1,00,000 per year per bank for senior citizens aged 60+ (raised from ₹50,000). TDS rate is 10% if PAN is provided, and 20% if PAN is not provided. The threshold applies per bank — not cumulatively across all your FD accounts.
• Which bank gives the highest FD rate in India right now? ▼
  In 2026, Small Finance Banks (SFBs) such as AU Small Finance Bank, Equitas Small Finance Bank, Suryoday Small Finance Bank, and Jana Small Finance Bank offer the highest FD rates among scheduled banks — typically 8.00% to 8.50% for regular citizens and 8.50% to 9.25% for senior citizens for select tenures. NBFC FDs (like Bajaj Finance) can offer 8.5–10%, but they are not DICGC-insured. Always verify the current rate on the bank's official website before booking, as rates change frequently.
• What is the difference between cumulative and non-cumulative FD? ▼
  A cumulative FD reinvests interest at the same rate every compounding period (quarterly or monthly) and pays out principal + total compound interest only at maturity. It gives the highest total return. A non-cumulative FD (also called a payout FD) credits interest to your savings account at regular intervals — monthly or quarterly — and returns only the principal at maturity. Non-cumulative FDs give lower total returns but are ideal for retirees who need a regular income stream. Choose cumulative for wealth accumulation; choose non-cumulative for monthly income.
• Can I break my FD before maturity? ▼
  Yes — most bank FDs can be closed prematurely after the minimum holding period (usually 7 days from booking). However, banks apply a premature withdrawal penalty of 0.5% to 1% — reducing the effective rate for the period the FD was held. As an alternative, consider taking a loan against the FD: borrow 75–90% of the FD value at 1–2% above your FD rate. Since the FD continues to earn interest, the net cost of the loan is just 1–2% — far cheaper than breaking it and losing the penalty.
• Is FD safe? What is DICGC insurance? ▼
  FDs at scheduled commercial banks, small finance banks, and cooperative banks in India are insured by the DICGC (Deposit Insurance and Credit Guarantee Corporation — a subsidiary of the RBI) up to ₹5 lakh per depositor per bank (principal + interest combined). If a bank fails, DICGC guarantees repayment of up to ₹5 lakh within 90 days. Deposits above ₹5 lakh per bank are not covered. Post Office FDs carry a full sovereign guarantee with no upper limit. NBFC FDs are not DICGC-insured and carry higher risk.
• What happens if I do not link my PAN with my FD? ▼
  If your PAN is not linked to the bank account holding your FD, TDS is deducted at 20% instead of the standard 10% — double the normal rate. This applies regardless of the interest amount and cannot be recovered easily without filing an ITR and claiming a refund. You may also face a lower TDS threshold. Always ensure your PAN is linked and verified with your bank before booking an FD.
• What is Form 15G and Form 15H for FD? ▼
  Form 15G is a self-declaration submitted by individuals below 60 years of age whose total income is below the taxable limit. Form 15H serves the same purpose for senior citizens (aged 60+). By submitting these forms to your bank at the start of each financial year, you instruct the bank not to deduct TDS on your FD interest. Both forms must be submitted to every bank where you hold FDs, and must be renewed every financial year. If 15G/15H is submitted and TDS has already been deducted, you can claim a refund via ITR — but it is better to submit in advance.
• Does a 5-year tax-saving FD save tax in FY 2026–2027? ▼
  A 5-year tax-saving FD qualifies for a Section 80C deduction on the principal (up to ₹1.5 lakh combined with all 80C investments), but only under the old tax regime. Under the new tax regime (default from AY 2027–2028), Section 80C deductions are not available — so the tax-saving FD offers no principal deduction benefit. Importantly, interest earned on a 5-year tax-saving FD is fully taxable under both regimes. There is a 5-year lock-in with no premature withdrawal permitted.
• Which is better — FD or debt mutual fund in 2026? ▼
  After the removal of indexation benefits on debt mutual funds in April 2023, both FD interest and debt mutual fund gains are taxed at slab rate — levelling the tax treatment. Key differences: FDs offer guaranteed, predictable returns; debt mutual funds carry credit and interest rate risk. FDs have DICGC insurance up to ₹5 lakh; debt MFs have no such insurance. Debt MFs offer T+1 liquidity with no penalties; FDs have premature withdrawal penalties. For most conservative investors in 2026, FDs at 8%+ (SFBs) are competitive with debt MF returns on a risk-adjusted basis. Debt MFs retain an edge in tax efficiency for gains held long-term under certain fund structures and for investors who need precise liquidity.
• What is the minimum and maximum amount for an FD? ▼
  Most banks allow FDs starting from ₹1,000 (some start at ₹5,000 or ₹10,000). There is no upper limit for retail FDs, but the rate structure changes for deposits above ₹2 crore (these are classified as "bulk deposits" and carry different rates — sometimes lower, sometimes higher, depending on the bank's liquidity needs). Post Office FDs start from ₹1,000 with no upper limit. NBFC FDs typically start from ₹10,000–₹25,000.
• What is the minimum and maximum tenure for an FD? ▼
  Bank FDs are available for tenures ranging from 7 days to 10 years. For FDs under 6 months (short-term), most banks calculate interest on a simple interest basis. For tenures of 6 months and above, compound interest (usually quarterly) applies. Post Office Time Deposits are available for 1, 2, 3, and 5 years only. SCSS has a fixed tenure of 5 years (extendable by 3 years).
• Are NBFC fixed deposits safe? ▼
  NBFC FDs offer higher interest rates (8.5–10%) but carry higher risk than bank FDs because they are not covered by DICGC insurance. If an NBFC defaults, depositors' funds are at risk. To minimise risk: (1) only invest in NBFCs rated AAA or AA+ by CRISIL or ICRA — this indicates the highest creditworthiness; (2) keep individual investment amounts moderate — do not put all your savings in a single NBFC; (3) prefer well-established names with a long track record (Bajaj Finance, Mahindra Finance, Shriram Finance). Never invest in NBFC FDs promising unusually high rates (10%+) without verifying their credit rating.
• Can I get a loan against my FD? ▼
  Yes — most banks offer a loan or overdraft against your FD for 75–90% of the FD value. The interest rate on such loans is typically 1–2% above your FD rate. Since the FD continues to earn interest throughout, the net effective borrowing cost is only 1–2%. This is one of the cheapest borrowing options in India — far cheaper than personal loans (12–20%) or credit card debt (36–42%). Ideal for emergencies or short-term cash needs without breaking the FD and losing the penalty.
• What is an FD laddering strategy? ▼
  FD laddering means splitting your total investment across multiple FDs with staggered maturities (e.g., 1 year, 2 years, 3 years, 4 years, 5 years) instead of putting everything in one long-term FD. Benefits: (1) one FD matures each year, providing liquidity without penalties; (2) as each tranche matures, you reinvest at the prevailing best rate — reducing reinvestment risk; (3) spreading across multiple banks keeps each deposit within DICGC's ₹5 lakh coverage. Laddering is the recommended strategy for retirees and those with large FD portfolios.
• What happens to my FD if the bank goes bankrupt? ▼
  If a scheduled bank fails, DICGC guarantees repayment of up to ₹5 lakh (principal + interest combined) per depositor within 90 days of the bank being declared a failed institution. The RBI would typically place such a bank under a moratorium, appoint an administrator, and initiate resolution. Any deposit amount above ₹5 lakh per bank is at risk and may be recovered partially (as an unsecured creditor) in the bank's resolution process — but recovery is uncertain. This is why it is prudent to never keep more than ₹5 lakh per bank if you prioritise capital safety.
• Can I open a joint FD? How is it taxed? ▼
  Yes — you can open an FD jointly with another person (usually a family member). For tax purposes, FD interest on a joint account is taxed in the hands of the primary (first) account holder — regardless of actual contribution. TDS is deducted using the primary holder's PAN. The primary holder must report this income in their ITR. DICGC insurance of ₹5 lakh applies per depositor per bank — meaning a joint FD is insured up to ₹5 lakh total (not ₹5 lakh per person). Each holder's individual accounts are covered separately by their own ₹5 lakh limit.
• How do I report FD interest in my income tax return? ▼
  FD interest must be reported under "Income from Other Sources" in your ITR each year, regardless of whether the FD has matured. For cumulative FDs (where interest is paid at maturity), you have two options: (1) report interest on an accrual basis (year by year as it accrues); or (2) report it entirely in the year of maturity. The accrual method avoids a large single-year tax spike and is recommended for long-term FDs. TDS deducted appears in your Form 26AS and AIS — always cross-check before filing. Use ITR-1 or ITR-2 depending on your total income and sources.
• What is the post-tax return on an FD for a 30% taxpayer? ▼
  For a 30% slab rate taxpayer (including 4% cess = effective rate ~31.2%), an FD at 8% yields a post-tax return of approximately 5.5%. An FD at 7.5% yields about 5.16% post-tax. An FD at 7% yields about 4.82% post-tax. Our FD calculator above computes post-tax returns automatically based on your tax bracket input. For comparison, PPF at 7.1% is fully tax-exempt — making it effectively superior to an 8% FD for a 30% bracket investor, if the 15-year lock-in is acceptable.
• Can NRIs invest in FDs in India? ▼
  Yes — NRIs can invest in Indian FDs through two account types: NRO (Non-Resident Ordinary) FDs and NRE (Non-Resident External) FDs. NRO FD interest is taxable in India at 30% TDS (no basic exemption). NRE FD interest is fully tax-exempt in India — making NRE FDs highly attractive. Repatriation from NRO accounts is limited (up to USD 1 million per year with CA certificate); NRE accounts allow full repatriation. FCNR (B) FDs allow deposits in foreign currency (USD, GBP, EUR, etc.) and are also tax-exempt in India. Always consult a CA about DTAA (Double Taxation Avoidance Agreement) implications in your country of residence.