What Are Fixed Deposits?
Your Gateway to safe, predictable investing with Fixed Deposits (FDs). Imagine placing your money with a bank or reputed institution for a chosen tenure at a pre-agreed interest rate. That’s exactly what an FD offers: your principal stays protected and your interest is known upfront, making planning simple.
Think of it as locking in today’s rate for tomorrow’s goal—whether it’s an emergency buffer, a short-term goal, or the stable part of your long-term portfolio.
Think of it as locking in today’s rate for tomorrow’s goal—whether it’s an emergency buffer, a short-term goal, or the stable part of your long-term portfolio.
How Fixed Deposits Work: A Beginner's Guide
Pick the deposit amount and tenure (from days to years), and choose whether you want interest paid out or reinvested.
The bank offers an interest rate for the chosen tenure. Once booked, the rate generally stays fixed for the full term.
Interest accrues over time and is either paid out (non-cumulative) or reinvested (cumulative) so it can compound.
On maturity you receive principal plus interest. You can withdraw, renew, or build an FD ladder based on your goals and the rate cycle.
â„ą Understanding interest rate & maturity value
The interest rate is the annual rate you earn on an FD. Your maturity value depends on the rate, tenure, and whether interest is paid out or reinvested for compounding. For example, â‚ą10,000 placed at 7% p.a. for 1 year earns about â‚ą700 before taxes (exact amount depends on compounding frequency).
Types of Fixed Deposits in India
1. Cumulative Fixed Deposit
Cumulative fixed deposits reinvest the interest, so you receive the full amount (principal + compounded interest) at maturity. They are ideal when you do not need regular payouts and want compounding to work quietly in the background.
- How it pays: Interest is reinvested; payout happens at maturity.
- Compounding: Typically quarterly, which can increase the maturity value over time.
- Tenure flexibility: Choose from short to long tenures based on your goal.
- Best use: Building a corpus for a planned expense like education, a wedding, or a down payment.
- Tip: Consider laddering multiple smaller FDs instead of one large FD for better liquidity.
- Best For: Conservative investors who can stay invested till maturity.
2. Non-Cumulative Fixed Deposit
Non-cumulative fixed deposits pay interest at regular intervals (monthly, quarterly, half-yearly, or annually). They are useful for predictable cash flow, especially for retirees or anyone who prefers steady income.
- Regular payouts: Interest is credited to your bank account on the chosen schedule.
- Income planning: Align payouts with recurring expenses like rent, EMIs, or bills.
- Tenure options: Available across tenures; payout amount depends on rate and frequency.
- Tax note: FD interest is taxable as per your slab; plan for TDS and eligibility for Form 15G/15H if applicable.
- Best For: Income seekers and conservative investors who prefer cash flow over compounding.
3. Tax-Saver Fixed Deposit (5-Year)
Tax-saver fixed deposits come with a mandatory 5-year lock-in and can qualify for a deduction under Section 80C (up to â‚ą1.5 lakh, subject to income-tax rules). Returns are predictable, but liquidity is limited due to the lock-in.
They work best when you want 80C coverage with low risk and you are comfortable holding the money till maturity.
- 80C benefit: Eligible for deduction up to â‚ą1.5 lakh under Section 80C (as per rules).
- Lock-in: 5-year lock-in; premature withdrawal is generally not allowed.
- Return profile: Fixed rate, but interest remains taxable.
- Best For: Conservative tax planning with a 5-year horizon.
4. Senior Citizen Fixed Deposit
Senior citizen fixed deposits are offered to eligible depositors (typically 60+), often at a higher interest rate than regular FDs. They can be set up as cumulative or payout, depending on whether you want growth or income.
Used well, they create a stable income layer alongside pension and other savings.
- Higher rates: Often includes an additional rate for seniors compared to standard FDs.
- Payout choice: Choose monthly/quarterly interest for income, or cumulative for compounding.
- Safety focus: Prefer strong institutions and diversify across banks if the amount is large.
- Best For: Retirees seeking predictable returns and steady cash flow.
5. Sweep-in / Flexi Fixed Deposit
Sweep-in (or flexi) fixed deposits link your savings account with an FD. Excess balance is swept into an FD to earn higher interest, and funds can be broken automatically when you need money in the account.
This blends liquidity with better returns than a plain savings balance—just confirm the bank’s breakage rules and the rate applied on the withdrawn portion.
- Better than savings: Earn FD-like interest on surplus cash.
- Auto liquidity: Funds sweep out when needed, subject to bank terms.
- Partial breakage: Some banks break only the required amount instead of the full deposit.
- Best For: People who keep idle balances but still need easy access.
Benefits of Fixed Deposits for Steady Growth
The Power of Compounding
Compounding in a cumulative fixed deposit happens when the interest you earn is reinvested, so your next interest is calculated on a larger base. This is how a simple, low-risk product can grow meaningfully over time.
The key is time and reinvestment. The longer you hold the FD (or renew it thoughtfully), the more “interest on interest” works in your favour—especially when combined with disciplined, regular savings.
How Compounding Works
Compounding means earning interest not only on your original deposit but also on the interest already added to it.
For example, ₹10,000 earning 7% becomes ₹10,700 in the first year. In the second year, 7% is earned on ₹10,700, giving ₹749. The extra ₹49 is the compounding effect—your interest starts earning interest.
Notice: With disciplined monthly savings, compounding can add meaningful growth even at FD-like rates. For example, over 25 years, â‚ą30 lakh of contributions can grow to roughly â‚ą81.5 lakh at 7% p.a. (rates vary), where a large portion of the final value comes from interest, not just contributions.
The Three Pillars of Compounding Success
Key Takeaway: Start early, stay consistent, and match your FD tenure to your goal. Compounding rewards patience, and laddering helps you manage liquidity and changing interest rates.
Start Early
Starting early gives your interest more time to compound. Even small, regular deposits into FDs/RDs can build a meaningful corpus over long horizons.
Stay Consistent
Automate regular savings and avoid premature withdrawals. Splitting money across multiple FDs helps you access funds without breaking everything at once.
Use an FD Ladder
Create an FD ladder (different maturity dates) so you have periodic liquidity and can reinvest at prevailing rates instead of locking everything at one rate.
Capital Protection
FDs offer predictable returns and are designed to protect your principal when held to maturity. Eligible bank deposits are covered by DICGC insurance up to â‚ą5 lakh per depositor per bank.
Predictable Returns
The interest rate is known upfront, making goal planning and cash-flow budgeting far easier than market-linked products.
Flexible Tenures
Choose tenures from days to years. Ladder multiple FDs to balance liquidity needs with better rates on longer terms.
Income Option
Non-cumulative FDs can pay monthly or quarterly interest, which can support regular expenses—especially in retirement.
Tax Planning
5-year tax-saver FDs can help with 80C deductions (subject to rules). Remember: FD interest is taxable, so focus on post-tax returns.
The Rupeeco Advantage: Finance Meets Freedom
Why Choose Rupeeco for Your Fixed Deposit Plan?
- âś“Simplified Investment Experience
An intuitive platform that helps you compare rates, choose tenures, and track your fixed deposits easily—even if you are starting for the first time.
- âś“Personalized Recommendations
Share your goals, timeline, and liquidity needs, and get FD and laddering suggestions tailored to your situation.
- âś“Zero Commission, Full Transparency
Clear rates, clear maturity amounts, and no hidden charges—so every rupee you save is easy to plan around.
- âś“Invest Anytime, Anywhere
Book new FDs, renew at maturity, choose payout frequency, and manage deposits from your smartphone.
- âś“Financial Education Hub
Learn with simple guides and calculators on FD laddering, taxation, TDS, and how to match tenures to goals.
- âś“Bank-Grade Security
Your data is protected with advanced encryption, and eligible bank deposits have DICGC insurance coverage up to â‚ą5 lakh per depositor per bank.
- âś“Dedicated Support
Get guidance from experienced investment advisors via call or chat whenever you need help.
- âś“Goal-Based Planning
Plan for retirement or any life goal with laddering reminders and renewal alerts aligned to your timelines.