What is the current FD interest rate in India?

FD rates vary by bank and tenure. As of 2025, major public sector banks (SBI, Bank of Baroda) offer 6.5 to 7.25% for regular customers and 7 to 7.75% for senior citizens on 1 to 3 year deposits. Private sector banks (HDFC, ICICI, Kotak) typically offer 7 to 7.5%. Small Finance Banks (AU, Equitas, Ujjivan) offer 8 to 9%+. Post Office Time Deposits offer 6.9 to 7.5%, guaranteed by the Government of India. Rates are reviewed periodically based on RBI's repo rate changes. Always check your bank's official website for the most current rates before investing, as rates change without prior notice.

Is FD interest taxable?

Yes, FD interest is fully taxable in India. It is added to your total income and taxed at your applicable income tax slab rate (5%, 10%, 15%, 20%, or 30%). Your bank deducts TDS at 10% if total interest earned across all your FDs at that bank exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). If you are in a lower tax bracket, submit Form 15G (if below 60 years) or Form 15H (if 60+) at the start of the year to prevent TDS deduction. Note: submitting Form 15G/15H avoids TDS but does not exempt you from tax liability - you must still declare the interest income in your ITR.

What is the difference between cumulative and non-cumulative FD?

In a cumulative FD, interest is compounded periodically (usually quarterly) and paid along with the principal at maturity. This maximizes wealth accumulation through compounding. In a non-cumulative FD, interest is paid out at regular intervals - monthly, quarterly, or annually - making it suitable for those who need regular income, like retirees. On ₹10 lakh at 7.5% for 3 years: a cumulative FD gives approximately ₹12.5 lakh at maturity. The non-cumulative monthly payout is about ₹6,250 per month. For investors who do not need the income for living expenses, cumulative is always better since periodic payouts typically go into a low-interest savings account and lose compounding benefit.

Can I break an FD before maturity?

Yes, premature FD withdrawal is generally allowed, but it comes with a penalty. Most banks reduce the applicable interest rate by 0.5% to 1% for premature withdrawals. For example, if you opened a 3-year FD at 7.5% but break it after 1 year, the bank might pay at the 1-year rate (say 6.8%) minus a 0.5% penalty - giving you only 6.3% for the period held. Some banks (HDFC, ICICI) offer special penalty-free premature withdrawal FDs at slightly lower rates. For tax purposes, the interest earned up to the point of withdrawal is fully taxable in the year of withdrawal. If you might need funds before maturity, consider creating multiple smaller FDs for better flexibility.

How much of my FD is insured by DICGC?

The Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, insures up to ₹5 lakh per depositor per bank. This ₹5 lakh covers your total deposits (savings, FD, RD, current accounts) at the same bank under the same ownership. If you have ₹3 lakh in savings and ₹4 lakh in FDs at the same bank, your total exposure is ₹7 lakh but only ₹5 lakh is insured. To protect amounts above ₹5 lakh, spread deposits across multiple banks (not just multiple branches). All scheduled commercial banks, small finance banks, and most cooperative banks are DICGC members. Public sector bank failure is extremely rare historically, but private and cooperative bank failures do occur.

What is FD laddering and why should I use it?

FD laddering means splitting your investment across FDs with staggered maturity dates instead of one single long-term FD. For example, instead of ₹12 lakh in one 3-year FD, create four FDs of ₹3 lakh each maturing in 1, 2, 3, and 4 years. Benefits: you get liquidity every year without premature withdrawal penalties; you reduce reinvestment risk by not locking all money at a single interest rate; longer tenures (which usually offer higher rates) are utilized for most of the corpus. When each FD matures, reinvest at the longest available tenure at the then-current rate. For risk-averse investors, disciplined laddering over 10 years often outperforms keeping money in a savings account and beats many debt mutual funds on post-tax basis for lower tax brackets.

How do I choose between short-term and long-term FDs?

The decision depends on two factors: your cash flow needs and the current interest rate environment. When rates are high (rising RBI cycle), prefer shorter tenures of 1 to 2 years so you can renew at even higher rates soon. When rates are falling or expected to fall, lock in longer tenures of 3 to 5 years to protect your current yield. For liquidity, ladder your FDs across multiple maturity dates instead of a single long-term FD - this gives you access to funds each year without premature withdrawal penalties. For goals within 3 years, match the FD tenure to the goal date. Tax-saver FDs have a mandatory 5-year lock-in and qualify for Section 80C deduction up to Rs. 1.5 lakh.

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FD Calculator

Calculate FD maturity amount, effective annual rate, and year-by-year growth. Compare quarterly, monthly, and simple interest compounding.

About the FD Calculator

Fixed Deposits are the most widely used savings instrument in India, with over ₹200 lakh crore deposited across banks. They offer guaranteed returns, DICGC insurance up to ₹5 lakh per bank, and zero market risk - making them the go-to choice for capital preservation and short-term goals.

Rates vary meaningfully across banks and tenures. Large banks like SBI and HDFC offer 6.0-6.5% for general public, while small finance banks (AU, Ujjivan, Jana) offer 8-9%+. Senior citizens get an additional 0.5% on most banks. Compounding frequency also matters: quarterly compounding (the Indian default) gives a slightly higher effective yield than annual compounding at the same stated rate.

The key tradeoffs with FDs are liquidity (breaking early costs 0.5-1% penalty), taxation (interest is fully taxable as income), and real returns (at 6% rate and 6% inflation, the real return is nearly zero). For goals beyond 3-5 years, equity SIPs or PPF typically outperform FDs after tax and inflation.

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Large Banks

SBI, HDFC, ICICI - 5.9-6.5% · Most reliable · DICGC insured

Lowest risk

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Small Finance Banks

AU, Ujjivan, Jana - 7.5-9%+ · Higher rates · Still DICGC insured

Higher yield

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Post Office TD

6.9-7.5% · Government-backed · No bank risk · Tax-saving option at 5yr

Govt guarantee

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Senior Citizens

+0.5% extra on most banks · ₹50,000 TDS threshold vs ₹40,000

Verified in rate table

FD Maturity Amount

Cumulative: A = P × (1 + r/n)^(n×t) | Simple Interest: A = P × (1 + r×t/100)

P = Principal deposit · r = Annual interest rate (decimal) · n = Compounding frequency per year (quarterly = 4, monthly = 12) · t = Tenure in years · Effective Annual Rate = (1 + r/n)^n - 1

Worked Example

₹5 lakh FD at 6.5% for 3 years (quarterly compounding)

Deposit:₹5,00,000

Rate:6.5% p.a.

Compounding:Quarterly (4x/year)

Tenure:3 years

Maturity amount ≈ ₹6,04,706 · Interest earned ≈ ₹1,04,706 · Effective annual rate ≈ 6.65% · Simple interest at 6.5% would give only ₹5,97,500 - compounding earns ₹7,206 extra

Tips & Insights

1
TDS is deducted at 10% when your total FD interest from a single bank exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). Submit Form 15G (below 60 years) or 15H (senior citizens) at the start of each FY if your total income is below the taxable limit - this prevents TDS deduction entirely.
2
DICGC insures only ₹5 lakh per depositor per bank across all accounts combined - not per FD. If you have ₹30 lakh to deposit, spread it across at least 6 banks. This applies to savings accounts, FDs, and RDs together.
3
FD laddering gives both better returns and liquidity. Instead of one ₹5 lakh FD for 5 years, create five ₹1 lakh FDs maturing in 1, 2, 3, 4, and 5 years. Each year one matures (providing liquidity), and you reinvest at the current rate - often higher than a locked long-term rate.
4
Tax-saving FDs (5-year lock-in, Section 80C) give ₹1.5 lakh deduction under the old tax regime. However, the interest earned is fully taxable. Compare the after-tax return (rate × (1 - tax bracket)) vs a PPF, which earns tax-free interest - PPF at 7.1% equals 10.1% pre-tax for someone in the 30% bracket.
5
Quarterly compounding gives a higher effective rate than annual compounding at the same stated rate. At 6.5%: annual compounding EAR = 6.5%, quarterly EAR = 6.65%, monthly EAR = 6.70%. When comparing FDs across banks, always compare EAR - not the nominal rate.
6
Breaking an FD early costs you 0.5-1% on the applicable (lower) rate for the period held. On a ₹5 lakh FD at 6.5% broken at 2 years (applicable rate 6%), the penalty of 0.5% costs about ₹5,000. For emergencies, keep 3-6 months expenses in a savings account or liquid fund instead of relying on FD breakage.
7
Small Finance Banks (SFBs) are also DICGC insured - AU Small Finance Bank, Ujjivan, Jana, ESAF, etc. offer 7.5-9%+ on various tenures. Keeping up to ₹5 lakh in an SFB FD is as safe as a large bank FD from an insurance standpoint, with significantly higher returns.

Why this matters for you

FDs occupy a specific and irreplaceable role in a financial portfolio: they are the only major instrument that combines guaranteed returns, deposit insurance, and fixed income. For goals with a defined 1-5 year horizon - a home down payment, a child's school fees, a business reserve - FDs are unbeaten. The question is not whether to use FDs, but which bank, which tenure, and how much to allocate vs higher-return instruments.

The real enemy of FD wealth is the combination of tax and inflation. At a 6.5% FD rate, a person in the 30% tax bracket earns only 4.55% post-tax. With India's CPI inflation averaging 5-6%, the real return is negative - the purchasing power of the money actually shrinks. This is why FDs are suitable for capital preservation in the short term, but unsuitable as the primary savings vehicle for long-term goals like retirement or education corpora.

The TDS mechanism catches many FD investors off-guard. Banks deduct TDS each year on cumulative FDs even though you receive the money only at maturity. This means you pay tax on interest you haven't physically received yet, creating a cash flow mismatch. Submitting Form 15G/15H at the start of each financial year eliminates this problem for those below the taxable income threshold - a simple step that saves 10% of your annual interest with zero effort.

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About the FD Calculator

FD Maturity Amount

Worked Example

Tips & Insights

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Compound Interest

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Frequently Asked Questions