FD Intelligence Guide
What is a Fixed Deposit?
A Fixed Deposit (FD) is a cornerstone of conservative wealth management. It involves depositing a lump sum for a fixed tenure at a predetermined, guaranteed interest rate, shielding your capital from market volatility.
Core Formula (Compound)
A = P(1 + r/n)^ntStrategic Advantages
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Capital Safety
Predictable returns with zero market risk.
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FD Laddering
Split deposits across multiple tenures for liquidity.
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Tax Benefits
Tax-saver FDs offer 80C deductions (5yr lock-in).
⚠ The Tax Reality
FD interest is fully taxable as per your income tax slab. Banks deduct TDS (10%) if interest exceeds:
- General Citizens:₹40,000 / year
- Senior Citizens:₹50,000 / year
📉 Inflation Awareness
Your Real Rate of Return is the FD rate minus inflation. If your FD gives 7% and inflation is 6%, your actual wealth grows by only 1%.
((1 + Rate) / (1 + Inflation)) - 1
Expert FAQs
Cumulative vs Non-Cumulative?
Cumulative: Interest is reinvested, benefiting from compounding. Best for wealth creation.
Non-Cumulative: Interest is paid out monthly/quarterly. Best for pensioners needing regular income.
Is tax applicable on accrued interest?
Yes. Even if you don't withdraw the interest (Cumulative FD), you must declare it in your yearly ITR ("Income from Other Sources") and pay tax on it annually.
Can I break an FD early?
Most banks allow premature withdrawal but charge a penalty (usually 0.5% - 1%) and reduce the applicable interest rate to the tenure actually served.
Do 5-Year Tax Saver FDs allow withdrawal?
No. Tax-saver FDs claimed under Section 80C have a strict 5-year lock-in period. You cannot withdraw the principal or break the FD before maturity.
Standardization Authority
Global Financial Reserve Reporting Standards (v4.2)
Last Audit
January 2026 | Reviewed by Senior Financial Analysts