Basics of Fixed Deposits

Know your FDs. A deposit is the most predictable instrument available in India, and predictability is worth paying for on money you cannot afford to risk.

Cumulative or non-cumulative

A cumulative deposit compounds interest and pays everything at maturity, which suits growth. A non-cumulative deposit pays interest monthly or quarterly, which suits people living off the income. The cumulative option yields more overall.

Bank versus corporate deposits

Bank deposits are insured up to ₹5 lakh per depositor per bank under DICGC. Corporate deposits pay more and carry the issuer's credit risk, which is a real risk, not a formality. Check the rating.

The tax position

Deposit interest is taxed at your slab rate, every year, whether or not you withdraw it. TDS applies above the prescribed threshold. After tax and inflation, a deposit often preserves value rather than growing it.

Laddering

Splitting money across deposits maturing at different times gives you access to some of it regularly without breaking a large deposit and losing the rate.

Before you decide

Everything above is general. What is right for you depends on what you are protecting, what you already hold, and what you can sustain. That is a fifteen-minute conversation, and it is free.