Compare two Fixed Deposit plans to find the best returns. Analyze different interest rates, compounding frequencies, and tenure options.
Plan A yields more returns than Plan B.
Fixed Deposits are one of the safest saving options available. Unlike market-linked options, bank FDs offer fully guaranteed interest rates that are locked in when you open the deposit.
In India, each depositor in a bank is insured up to a maximum of ₹5 Lakh for both principal and interest amount by the DICGC (Deposit Insurance and Credit Guarantee Corporation).
By default, Indian banks compound FD interest on a quarterly basis. Under quarterly compounding, interest earned every three months is added to your principal, meaning you earn interest on interest.
Comparing two FDs requires looking at the compounding frequency. A monthly compounding FD will give a slightly higher yield than a quarterly compounding one at the exact same nominal interest rate.
Banks don't offer a flat rate across all tenures — most publish a rate card where 1-2 year deposits earn a different rate than 3-5 year deposits, and small finance banks or NBFCs often pay 0.5%-1.5% more than large public sector banks for the same tenure to attract deposits.
When comparing Plan A and Plan B above, make sure you're matching like-for-like tenures from each institution's actual rate card, not just plugging in a rate you remember. A seemingly small 0.5% difference compounds into a meaningfully larger maturity value over a 5+ year deposit.
Most FDs allow premature closure, but banks apply a penalty of 0.5% to 1% on the interest rate applicable for the period the deposit actually stayed open — not the rate you were originally promised. This matters when comparing plans with different lock-in flexibility.
A plan with a slightly lower headline rate but a lower premature withdrawal penalty (or none at all, as with some flexible/sweep-in FDs) can be the better choice if there's a real chance you'll need the funds before maturity.
FD interest is fully taxable at your income slab rate, and banks deduct 10% TDS once your total interest income from that bank crosses ₹40,000 in a year (₹50,000 for senior citizens). This is identical for both plans being compared, but it does reduce your real, in-hand return below the maturity value shown above.
If you're in a higher tax bracket, submitting Form 15G/15H (where eligible) or splitting deposits across banks to stay under the TDS threshold can preserve more of your interest — a factor worth weighing alongside the raw rate difference between Plan A and Plan B.
Fixed Deposits in India usually compound interest quarterly. The higher the compounding frequency, the more interest you earn. For example, monthly compounding yields slightly higher returns than quarterly or annual compounding for the same interest rate.
Yes, bank Fixed Deposits are generally safer. Deposits in commercial banks are backed by DICGC insurance up to ₹5 Lakh per bank. Corporate FDs (offered by companies) offer higher interest rates to compensate for the default risk, but they are not insured.
Yes, most banks allow premature withdrawals. However, they usually charge a penalty (ranging from 0.5% to 1.0%), and the interest is paid at the rate applicable for the actual period the deposit remained with the bank, rather than the original contracted rate.
Interest earned on FDs is fully taxable. It is added to your annual income and taxed according to your marginal income tax slab. This is a key disadvantage compared to equity investments which enjoy lower tax rates.
Banks deduct 10% Tax Deducted at Source (TDS) if your total annual interest income across all FD accounts at a bank exceeds ₹40,000 (₹50,000 for senior citizens). If your total income is below the taxable limit, you can submit Form 15G or 15H to prevent TDS.
Yes, most banks offer a loan or overdraft facility against your FD, typically up to 90% to 95% of the FD value. The interest charged is usually 1% to 2% higher than the FD interest rate, allowing quick liquidity without breaking the deposit.
In a Cumulative FD, interest compounds and is paid out only at maturity, yielding higher final wealth. In a Non-Cumulative FD, interest is paid out periodically (monthly or quarterly), making it suitable for retired individuals seeking regular income.
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