Fixed Deposits

Last Updated On -08 Jul 2025

Fixed Deposits

Mutual funds, stock market, and cryptocurrencies are all investments that change quickly, but a lot of individuals who don't like to take risks still choose the Fixed Deposit (FD) as a means to keep money. A fixed deposit is a terrific choice because it is easy, safe, and you know what to expect. It also assures earnings and peace of mind. Fixed deposits can be a good investment for you no matter what stage of your financial journey you are in. They can be a great option for students just starting out, professionals who want steady returns, or retirees who want to make money every month.

This article speaks about fixed deposits, how they work, their benefits and cons, and when they are ideal to utilize in a budget.

What does it Mean to Put Money into a Fixed Deposit?

Banks and non-banking financial companies (NBFCs) both provide Fixed Deposits (FDs). You put a given amount of money down for a set amount of time at a set interest rate. An FD locks up your money for a specific amount of time, anywhere from 7 days to 10 years, and guarantees you a steady return. This isn't like a savings account, where the interest rates might fluctuate and it's easier to get your money.

The bank will give you back the original sum plus the interest that has built up when the period is up. Some banks pay interest on a regular basis, like once a month or once every three months. This is especially good for people who seek a steady income, like retirees.

How do Fixed Deposits Work?

When you make a fixed deposit, you place your money in an account for a certain amount of time. The bank and the length of time the money is stored will determine the interest rate. A 1-year FD might pay 6.5% interest every year, but a 5-year FD might pay 7.25%. These rates are fixed when you make a deposit and stay the same, even if the market changes.

You might want to choose Cumulative FD: Interest increases over time and is paid back when the loan is due.

FDs are safe, but they won't save your money from losing value over time. You only make 0.25% in real terms if your FD earns 6.75% and inflation is 6.5%. You might want to think about putting FDs along with other types of investments, including SIPs, mutual funds, or PPFs, if you want to develop wealth over time.

  • Non-cumulative FD: You get interest once a month, once every three months, or once a year.
  • Banks also give seniors better FD rates, which are normally 0.25% to 0.50% higher than normal rates.
  • Returns are guaranteed, which is one of the best things about fixed deposits. You don't have to worry about the market shifting because FDs have a set interest rate. 
  • You know how much money you'll make by the end of the term, but you don't know how much you'll make with stocks or mutual funds.
  • Money Safety: People think that putting money in a bank's fixed deposit is a safe way to invest. In India, the Deposit Insurance and Credit Guarantee Corporation (DICGC) guarantees deposits of up to ₹5 lakh for each person at each bank.
  • Terms that can be changed: You can stay for a few days or a few years. FDs are flexible, so they can help you attain your goals in both the short and long term. You may use them to save for retirement or a vacation, for instance.
  • Loan Service: Need cash now? You don't have to break your FD to acquire a loan on it. Most banks will lend you 90% of the value of your FD.

Is Fixed Deposit Safe?

People who wish to be safe should put their money in fixed deposits. They might not be the best choice for making money in the stock market, but they are a good one. They keep your money safe, make sure you have a lot of it coming in, and teach you how to use it. FDs are a terrific method to save money for things like short-term goals, retirement, or emergencies. Only use them when you have to. Spread your money around to get the best of both worlds: safety and development.

 

Did you know?

Around 60% of Indian families' money is still in fixed deposits and other bank accounts, even though the stock market and fintech investments have gone up. This shows how much faith the Indian people have in FDs because they are so dependable.

 

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Frequently Asked Questions (FAQs)

Can I take my FD out before it matures?

Yes, but you have to pay a charge and gain less interest if you do it too soon. Before breaking an FD early, always read the bank's rules.

Do you have to pay taxes on the money you get back from an FD?

Yes. The interest you earn on FDs is added to your income and taxed at the same rate as your other income. If you made more than ₹40,000 in interest in a year (or ₹50,000 for seniors), banks would take 10% of it as TDS (Tax Deducted at Source).

Are corporate FDs safe?

Company or corporate FDs usually pay more interest, but they also carry more risk. Always check a company's credit score (like CRISIL or ICRA) before you invest in it. If you want to be safe, stick with bank FDs.

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