๐ฆ Earn upto 8.5% FD rates โ compare banks now
COMPARE RATESA Fixed Deposit (FD) is a savings instrument where you deposit a lump sum with a bank for a fixed tenure at a fixed interest rate, and the bank pays you back the principal plus accumulated interest at maturity. Unlike a savings account, the rate is locked in for the full tenure, making returns predictable โ but the tradeoff is reduced liquidity, since early withdrawal usually incurs a penalty.
Compounding frequency matters: an FD that compounds quarterly will yield slightly more than one compounding annually at the same nominal rate, because interest is calculated and added to the principal more often, so subsequent interest is earned on a slightly larger base each time.
Higher compounding frequency (monthly or quarterly) yields marginally more than annual compounding at the same rate โ but banks usually fix the compounding frequency for a given FD scheme, so check your bank's specific terms rather than assuming you can choose freely.
Yes, FD interest is added to your total income and taxed at your applicable income tax slab rate. Banks also deduct TDS (Tax Deducted at Source) if interest exceeds a threshold in a financial year โ check current TDS limits with your bank.
Most banks charge a penalty (typically 0.5-1% reduction in the interest rate) for premature withdrawal. The exact penalty and rules vary by bank, so check your specific FD's terms before depositing if early access might be needed.