Fixed Deposit (FD): Interest, Tax and How It Works
Updated 5 November 2026
A fixed deposit (FD) keeps a lump sum with a bank or the post office for a fixed time at a fixed interest rate. Your money is safe and the return is known on day one.
How FD interest is added
Most banks add interest every quarter, so interest also earns interest. You can also choose monthly or quarterly payout, where interest is paid to your account instead of being added.
Post office time deposit rates (October–December 2026)
| Tenure | Rate per year |
|---|---|
| 1 year | 6.9% |
| 2 years | 7% |
| 3 years | 7.1% |
| 5 years | 7.5% |
Rates are set by the government every quarter. Bank FD rates differ by bank; check your bank's website.
Tax on FD interest
FD interest is added to your income and taxed at your slab rate. Banks deduct TDS when interest crosses a yearly limit; if your income is below the taxable limit you can submit Form 15G (or 15H for senior citizens) to avoid TDS. The 5-year tax-saver FD qualifies for section 80C in the old regime.
When an FD makes sense
- Money you need in 1 to 3 years, like a planned purchase.
- An emergency fund you must not risk.
- Senior citizens, who usually get about 0.5% extra.
Try it
Open the FD calculator and enter your own numbers. Words you don't know are explained in the money glossary.