A fixed deposit or FD is an investment product which lets the depositor park their money for a fixed period to earn interest. It is illiquid and has a lockin period, unlike a savings bank deposit.
Fixed deposit accounts offer a higher rate of interest to the investor than most savings banks. FD is offered by both banks and non-banking financial companies (NBFCs).
Withdrawing from an FD before the lockin period is over invites a penalty but is not prohibited.
The interest earned on an FD is taxable according to the investor’s tax slab, with the issuer deducting 10 percent as tax deducted at source (TDS) on the interest.
FDs with credible and strong banks are considered to be safer instrument than other riskier investment products.