Beginner guide · 6-minute read
Fixed deposits, explained simply
A fixed deposit (FD) is money you leave with a bank for a set time at a fixed interest rate. You know exactly what you'll get back, which is why FDs are the most familiar way to save in India.
Checked on 14 Oct 2026 against SBI's card rates (from 15 Dec 2025) and DICGC rules.
In one minute
- Who offers it
- Banks and small finance banks. Some companies offer 'company FDs' too.
- What it pays
- SBI pays 6.05–6.4% depending on the term (card rates from 15 Dec 2025). Senior citizens get about 0.5% more. Other banks differ.
- How long
- From 7 days to 10 years. Tax-saver FDs are locked for 5 years.
- How safe
- Bank FDs are insured up to ₹5 lakh per person per bank, interest included. Company FDs are not.
How it works, with real numbers
Put ₹1,00,000 in a 5-year FD at 6.05% (SBI's rate). Interest is added every quarter, so you'd get back ₹1,35,018 at the end.
The interest is taxed every year, even though you only receive it at maturity. At a 30% slab that's about ₹10,925 over 5 years, leaving you ₹1,24,092: about 4.26% a year after tax.
Your money ₹1,00,000Interest after tax ₹24,092
Pros and cons
Good things
- Safe and predictable. The rate is fixed for the whole term, so you know the final amount on day one.
- Insured. Up to ₹5 lakh per person per bank, including interest.
- Flexible terms. Pick anything from a week to 10 years, and choose interest at the end or paid out monthly or quarterly.
- Easy to open. A few taps in most banking apps.
- You can get out early. Usually with a small penalty on the interest.
- Higher rates for seniors. Most banks pay people aged 60+ about 0.5% more.
Things to watch
- Taxed every year at your slab rate. Even when the interest is only paid at maturity.
- Often trails inflation after tax. At a 30% slab, 6.05% becomes 4.26% after tax, below today's 5.54% inflation.
- TDS. Banks deduct 10% tax once your interest at that bank crosses ₹50,000 in a year (₹1 lakh for senior citizens).
- Rates move. When the RBI cuts rates, new FDs pay less.
- Company FDs can fail. They pay more because they carry more risk, and they aren't insured.
Is it right for you?
Mistakes to avoid
- Forgetting the tax. A cumulative FD's interest is taxable every year, not just at the end.
- Keeping more than ₹5 lakh in one bank. Only ₹5 lakh per bank is insured; spread larger amounts.
- Breaking a big FD for a small need. Several smaller FDs with different end dates give you flexibility.
- Skipping Form 15G/15H. If your total income is below the taxable limit, submit Form 15G (15H if you're 60+) so the bank doesn't deduct TDS.
How to start
- Pick a bank and a term that matches when you'll need the money.
- Choose interest at maturity (cumulative) or paid out monthly or quarterly.
- Open it in your bank's app or at a branch. KYC needs your PAN and Aadhaar.
- Add a nominee.
- Note the maturity date, and whether it renews automatically.
Words you'll see
- Principal
- The amount you deposit.
- Tenure
- How long the deposit runs.
- Cumulative
- Interest is added to the deposit and paid at the end.
- TDS
- Tax deducted at source: tax the bank takes out before paying you.
- Form 15G / 15H
- Forms that tell the bank not to deduct TDS when your income is below the taxable limit.
- DICGC
- The RBI body that insures bank deposits up to ₹5 lakh per person per bank.
Try it with your own numbersSee the tax, what you keep, and how it compares with other options.
This guide explains how things work. It is not advice on what you should invest in. NetReturns is not SEBI-registered.