Important Fixed Deposit Rules and Regulations You Must Know


Last Updated on March 10, 2024 by admin

Fixed Deposits are one of the most popular types of investment options in India due to the funds’ security and the return’s certainty. However, it is essential to remember that some rules and regulations must be followed when investing in an FD with a minimum fixed deposit amount. 

FD with the attractive FD interest rates 2022 is a safe, secure and smart way to grow your finances simultaneously. The best way to get the most out of your FD investment with a minimum fixed deposit amount is to be familiar with all the rules and regulations surrounding the investment. You can begin saving money with a minimum fixed deposit amount in the best FD schemes offered by the bank or non-banking financial company in India.

Listed below are some of the essential rules and regulations of Fixed Deposit schemes to keep in mind while investing

Tax Deduction at Source (TDS) on FDs

Tax Deducted at Source refers to the Tax levied on the amount of interest paid on FDs. The bank or NBFC pays it to the Income Tax Department, which is deducted from your FD interest amount. Therefore, you will receive or pay the difference if a surplus or deficit of TDS is paid by the bank/NBFC on FD interest. TDS is deducted at 10% on the amount you save on your FD if it exceeds Rs 40,000 if you provide your PAN number when you open the account. A tax of 20% is levied if the information is not available. As far as Post Office Term Deposits are concerned, TDS does not apply to them. However, when filing their income tax returns, individuals must declare the interest they earned on the Post Office FDs to avoid penalties. Senior citizens are not required to pay TDS on interest accrued on fixed deposit accounts if the interest is lower than Rs. 50,000.

FD interest tax

It is important to note that the interest earned on FD accounts is completely taxable under the governing laws in India. This is because the interest you earn on your FDs is incorporated with your total income, which is subject to taxation at the appropriate rate. As specified under the Income Tax Act, the tax rate on your total taxable income will be determined by the slab application to your total taxable income. The amount you earn as interest on your fixed deposit is taxed at 20% if your taxable income is Rs. 10 lakhs for the fiscal year 2019-2020.


The risk involved in FDs with a minimum fixed deposit amount is very low since they are one of the safest investment options. Among these risks is the possibility that a person may lose their deposit if the bank suffers bankruptcy.  In addition to the above, several banks and NBFCs offer insurance on both principal and interest for a maximum amount of Rs. 5,00,000. This applies both to the principal and interest amount held by them. In addition, deposit Insurance and Credit Guarantee Corporation provides this insurance cover for depositors. However, investing in a bank or NBFC does not protect in the event of a bank collapse.

FD loan facility

Several banks and non-banking financial companies offer loans against fixed deposits. These loans are usually offered as an overdraft facility, a type of short-term loan. A loan’s amount depends on the deposit’s size and length. Depending on the duration of your fixed deposit, you may be able to choose a term for your loan if it coincides with your fixed deposit. There will be no possibility of prematurely withdrawing your limited deposit amount from the account.

Early withdrawal penalty

As a general rule, fixed deposit investments with a minimum fixed deposit amount are quite famous and many people avoid investing in them due to this FD rule. FDs can be withdrawn easily in an emergency, but if you make a premature withdrawal, it is usually subject to a penalty. In most cases, the amount of the penalty is determined by the bank or NBFC where your money was deposited. There may be a significant percentage or even all of the interest you would have received on maturity that may be lost due to the penalty. For this reason, you shouldn’t break your FD before it matures.


With this knowledge, you can open a secure FD with a minimum fixed deposit amount to save for your future goals and dreams. However, a pre-determined interest rate is attached to this investment scheme which usually has a 0.5% higher rate for senior citizens. Therefore, to make the best investments, staying up to date with the latest interest rates on fixed deposits offered by your preferred banks and non-banking financial companies is essential.