Question 1

What is a Fixed Deposit (FD)?

Accepted Answer

A Fixed Deposit is a financial instrument where you deposit a lump sum for a fixed tenure at a predetermined interest rate. It is one of the safest investment options in India, offered by banks and NBFCs.

Question 2

How is FD interest calculated?

Accepted Answer

FD interest can be calculated using simple interest (paid out periodically) or compound interest (reinvested quarterly). Most banks use quarterly compounding for cumulative FDs.

Question 3

Is FD interest taxable?

Accepted Answer

Yes, FD interest is fully taxable as per your income tax slab. Banks deduct TDS at 10% if annual interest exceeds ₹40,000 (₹50,000 for senior citizens). You can submit Form 15G/15H to avoid TDS if total income is below taxable limit.

Question 4

What is the difference between cumulative and non-cumulative FD?

Accepted Answer

In a cumulative FD, interest is compounded and paid at maturity along with the principal. In a non-cumulative FD, interest is paid out at regular intervals (monthly, quarterly, or annually).

Year	Opening Balance	Interest Earned	Closing Balance
1	₹1,00,000	₹7,186	₹1,07,186
2	₹1,07,186	₹7,702	₹1,14,888
3	₹1,14,888	₹8,256	₹1,23,144
4	₹1,23,144	₹8,849	₹1,31,993
5	₹1,31,993	₹9,485	₹1,41,478

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What is a Fixed Deposit?

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