Question 1

Is FD interest taxable?

Accepted Answer

Yes. FD interest is fully taxable as "Income from Other Sources" at your applicable income tax slab rate. TDS (Tax Deducted at Source) at 10% is deducted if annual interest exceeds ₹40,000 (₹50,000 for senior citizens). Submit Form 15G/15H to avoid TDS if your total income is below taxable limit.

Question 2

Which compounding frequency gives the best FD returns?

Accepted Answer

Monthly compounding gives the highest returns, followed by quarterly, half-yearly, and yearly. However, the difference is small — a 7% FD compounded monthly gives 7.23% effective yield, vs 7.19% for quarterly. Most bank FDs compound quarterly.

Question 3

What happens if I break an FD prematurely?

Accepted Answer

You typically get the contracted interest rate minus a penalty (usually 0.5–1%). For example, if you have a 3-year FD at 7% and break it at 2 years, you may get 6.5% for the 2 years held. Some banks waive premature withdrawal penalties for senior citizens.

Question 4

Are senior citizen FD rates higher?

Accepted Answer

Yes. Almost all banks offer 0.25–0.50% additional interest on FDs for senior citizens (age 60+). Some small finance banks offer up to 0.75% extra. This is a significant benefit that can add up to thousands of rupees extra.

Question 5

Is DICGC insurance available on FDs?

Accepted Answer

Yes. The Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance cover up to ₹5 lakh per depositor per bank across all deposits (savings + FD + RD). For amounts above ₹5L, consider splitting across banks.

Bank	1 Year	2 Year	3 Year	5 Year
SBI	6.80%	7.00%	6.75%	6.50%
HDFC Bank	6.60%	7.00%	7.00%	7.00%
ICICI Bank	6.70%	7.00%	7.00%	7.00%
Axis Bank	6.70%	7.10%	7.10%	7.00%
Kotak Mahindra	7.10%	7.10%	7.10%	6.20%
Yes Bank	7.25%	7.25%	7.25%	7.25%

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