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.
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