Fixed Deposit Glossary
Key terms and definitions every FD investor in India should know.
Fixed Deposit
A financial instrument where you deposit a lump sum with a bank or NBFC for a fixed tenure at a guaranteed interest rate.
TDS
Tax Deducted at Source — the tax amount banks automatically deduct from your FD interest before paying it to you.
Cumulative FD
A Fixed Deposit where interest compounds over the tenure and the entire amount (principal + interest) is paid at maturity.
Non-Cumulative FD
A Fixed Deposit where interest is paid out at regular intervals (monthly, quarterly, half-yearly, or annually) instead of being reinvested.
Compound Interest
Interest calculated on both the initial principal and the previously accumulated interest — 'interest on interest.'
Maturity
The date when a Fixed Deposit tenure ends and the bank pays back the principal along with any accumulated interest.
Principal
The original sum of money deposited into a Fixed Deposit, on which interest is calculated.
DICGC
Deposit Insurance and Credit Guarantee Corporation — the RBI subsidiary that insures bank deposits up to ₹5 lakh per depositor per bank.
Section 80C
An Income Tax Act provision allowing a deduction of up to ₹1,50,000 per year on specific investments, including 5-year tax-saving Fixed Deposits.
Form 15G
A self-declaration form submitted to banks by individuals under 60 to prevent TDS deduction on FD interest when total income is below the taxable limit.
Form 15H
A self-declaration form for senior citizens (60+) to prevent TDS deduction on FD interest when their estimated tax liability is nil.
Premature Withdrawal
Closing a Fixed Deposit before its maturity date, which typically results in a penalty in the form of a reduced interest rate.