A Fixed Deposit (FD) is one of the most trusted savings instruments in India — offered by banks and NBFCs with a guaranteed return locked in at the time you deposit. Unlike market-linked investments such as mutual funds, your principal is safe and the interest rate is fixed for the chosen tenure. Use our free FD Calculator to project maturity amount and interest before you book a deposit, and compare long-term options in our FD vs SIP comparison.
Cumulative vs Non-Cumulative FD
Indian banks offer two main interest payout structures. Cumulative FD compounds interest and pays everything at maturity — ideal when you are building wealth and do not need interim cash flow. Non-cumulative FD pays interest monthly, quarterly, or annually — better for retirees or anyone who needs regular income from savings.
How FD Interest Is Calculated
Most Indian bank FDs use quarterly compounding. The standard formula is:
A = P × (1 + r/n)^(n×t)
Where P is principal, r is the annual interest rate (as a decimal), n is compounding frequency per year (usually 4 for quarterly), and t is tenure in years. The FD Calculator applies this automatically — enter amount, rate, and tenure to see maturity value and total interest. For a deeper look at compounding mechanics, see our compound interest calculator guide.
TDS and Tax on FD Interest in India
Banks deduct 10% TDS if FD interest exceeds ₹40,000 per year (₹50,000 for senior citizens). If PAN is not submitted, TDS rises to 20%. FD interest is fully taxable as "Income from Other Sources" at your income tax slab rate — TDS is only an advance deduction, not the final tax. Submit Form 15G or 15H if your total income is below the taxable threshold to avoid TDS being deducted upfront.
Approximate FD Rates (June 2026)
Rates change frequently — always verify on the bank's website before booking. As a rough reference for June 2026: SBI typically offers around 6.5–7.1%, HDFC Bank around 7.0–7.4%, ICICI Bank around 6.9–7.25%. Small finance banks often advertise 8–9%+ for select tenures; check RBI registration and remember DICGC covers up to ₹5 lakh per depositor per bank.
FD vs SIP — Which Suits You?
FD suits risk-averse investors who want guaranteed returns, capital preservation, and short-to-medium tenures (1–5 years).SIP / mutual funds suit long-term wealth creation with historically higher returns (equity funds have often delivered roughly 10–15% CAGR over long periods) but carry market-linked risk. Many Indians use FDs for emergency funds and near-term goals, and SIPs for retirement and goals 7+ years away. Read our full FD vs SIP guide for India before deciding.
Frequently Asked Questions
Is FD interest taxable in India?
Yes — FD interest is fully taxable as "Income from Other Sources" at your applicable income tax slab rate. Banks also deduct 10% TDS when annual interest exceeds ₹40,000 (₹50,000 for senior citizens). Submit Form 15G (or 15H for seniors) if your total income is below the taxable limit to avoid TDS deduction.
What is the difference between cumulative and non-cumulative FD?
Cumulative FD compounds interest and pays the full amount at maturity — better for building wealth. Non-cumulative FD pays out interest monthly, quarterly, or annually — better for those needing regular income, like retirees.
Which bank gives the highest FD interest rate in India in 2026?
Small finance banks (like AU Small Finance Bank, Ujjivan, Suryoday) typically offer the highest rates — often 8–9%+ for certain tenures. However, they carry higher risk than nationalized or large private banks. DICGC insurance covers deposits up to ₹5 lakhs per depositor per bank, regardless of bank type.
Is it better to choose monthly or cumulative FD?
Cumulative (compound interest) FD gives a higher effective yield because interest earned also earns interest. Monthly payout FD has a slightly lower effective return but provides regular cash flow. Choose monthly/quarterly payout only if you need regular income; otherwise, cumulative gives better total returns.
Related Reading
- FD vs SIP — Where Should You Invest in India?
- Compound Interest Calculator — How Compounding Grows Your Money
- How to Start a SIP in India — Beginner's Guide