Fixed Deposit

Banking

Quick Definition

A Fixed Deposit (FD) is a financial instrument offered by banks and financial institutions where money is invested for a fixed period at a predetermined interest rate.

Detailed Explanation

A Fixed Deposit is one of the most popular low-risk investment options in India. You deposit a lump sum amount with a bank for a fixed tenure (ranging from a few days to several years) and earn guaranteed returns at a fixed interest rate.

Key Features of Fixed Deposit

  • Fixed interest rate (decided at the time of investment)
  • Flexible tenure (7 days to 10 years)
  • Safe and secure investment
  • Option of cumulative (compounded) or non-cumulative interest payouts

Benefits

  • Guaranteed returns with low risk
  • Suitable for conservative investors
  • Higher interest rates than savings accounts
  • Option for premature withdrawal (with penalty)

Taxation

Interest earned on FD is taxable, and TDS may be deducted if it exceeds the threshold, as per rules of the Income Tax Department of India.

FDs are ideal for individuals looking for stable and predictable returns without exposure to market risks.

Example

"If you invest ₹1,00,000 in an FD at 7% interest for 1 year, you will receive ₹1,07,000 at maturity (approx., depending on compounding)."

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