Fixed Deposit Rules and Regulations Everyone Should Know

Eligibility to Open an FD

Several entities can open an FD in India, like

• Individuals
• Joint account holders
• Minors (with a guardian)
• Senior citizens
• Hindu Undivided Families (HUFs)
• Businesses and trusts

Most banks allow online FD opening, which makes the FD investing process very easy and convenient.

Minimum and Maximum Deposit Limits

The minimum amount to open an FD varies from bank to bank. Generally, the minimum deposit amount starts as low as ₹1,000. Some banks have a minimum FD amount of ₹10,000.

There is no maximum limit for investing in a regular FD. But if you are opting for a tax-saver FD, it comes under Section 80C of the Income Tax Act. This FD has an investment limit of ₹1.5 lakh per financial year.

Tenure Rules

FD tenure can range from 7 days to 10 years. Once you choose a tenure for the FD, your interest rate is locked in for the entire duration. If interest rates fall later, your FD remains unaffected.

Interest Payment Options

FDs offer two types of interest payment options-

• Cumulative FD- Interest is compounded and paid at maturity.
• Non-cumulative FD- Interest is paid weekly, monthly, quarterly or annually.

Cumulative FDs generally offer higher maturity amounts due to compounding.

Premature Withdrawal Rules

You can withdraw your FD before maturity, but-

• Banks charge a penalty, usually between 0.5%–1%.
• The interest rate is recalculated based on the actual period the deposit was held.

Taxation Rules

In India, interest earned on fixed deposits is completely taxable.

• Banks deduct TDS at 10% if interest income in a year exceeds ₹40,000 (₹50,000 for senior citizens).
• If your income is below the taxable limit, you can submit Form 15G/15H to avoid TDS.

Tax-Saving FD Rules

Tax-saving FDs come with special regulations. These FDs have a lock-in period- 5 years. One can avail maximum tax benefit- ₹1.5 lakh under Section 80C. Premature withdrawal is not allowed on these FDs These are ideal for long-term tax planning.

Senior Citizen Benefits

FDs for Senior citizens have higher interest rates, usually 0.25% to 0.75% extra. Some FD schemes are designed specifically for senior citizens. These FDs offer even a better rate of interest.

Renewal and Auto-Renewal Rules

At maturity, you can-

• Withdraw your FD
• Renew it for another term
• Renew only the principal and withdraw the interest

If you select auto-renewal, the FD will automatically renew at the rate prevalent during renewal.

FD Insurance Rules

Bank FDs are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Under this, each depositor gets insurance up to ₹5 lakh per bank. This includes the principal and interest amount.

Nomination Rules

Every FD account allows you to add a nominee. And it is advisable to add a nominee. This ensures your money is transferred smoothly to a chosen family member in case of an emergency.

Loan Against Fixed Deposit

Most of the banks give FD-backed loans, known as FD OD (fixed deposit over-draft). Through this, you can take a loan of up to 75%–90% of your FD value. This is helpful when you need quick funds without breaking your deposit.