Long-term fixed deposits (typically 1–10 years) are generally better for wealth accumulation, offering higher interest rates ( 6 % 6 % - 7.5 % 7 . 5 % p.a.) and stable returns. They are ideal for long-term goals like retirement or education, allowing for compounding interest. However, they have lower liquidity and higher penalties for early withdrawal compared to short-term options.
An FD is an ideal investment strategy for long-term goals. With FDs, you can deposit a lump sum amount with the bank and earn interest till the FD matures. ICICI Bank offers attractive interest rates on FD with a range of tenure options. Open an FD with ICICI Bank today and meet your financial goals with confidence.
A long-term FD is where your money is invested for a longer duration, say, ranging from 1 year to 10 years. It is ideal for those who want stable and assured returns over time. Long-term FDs help with financial planning for future needs like education, marriage, or retirement.
Disadvantages of term deposits
To earn interest on your term deposit, your money is locked away for a chosen period of time. If you need your money before the term ends, you may have to pay a penalty fee. You may only receive a proportion of the interest earnt, or none at all.
Long-term investing historically rewards patience far more than attempts to time the market. Warren Buffett emphasizes staying invested through volatility because missing even a few strong market rebounds can significantly reduce long-term returns.
Your investment in a bank is insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme, which covers your deposits up to Rs. 1 lakh for both principal and interest amount held in the same capacity and same right. So, even if the bank goes insolvent, your fd investment will be safe.
The 7-3-2 rule is a financial strategy for wealth building, suggesting it takes 7 years to save your first major financial goal (like a crore), then accelerating to achieve the next goal in 3 years, and the third goal in just 2 years, leveraging compounding and disciplined, increased investments (like a 10% annual SIP hike). It highlights how returns compound faster over time, drastically reducing the time needed for subsequent wealth targets, emphasizing patience and consistent, growing contributions.
Loss of Interest: When an individual withdraws before maturity, they must know that they will not get the exact amount based on the rate of interest and duration of the fixed deposit because it has withdrawn before the tenure that was decided on the date of booking the FD.
The FD vs stocks comparison highlights even starker differences in risk and return potential: Return potential: Stocks have historically delivered 12-15% annual returns over long periods compared to 6-8% for FDs. Volatility: Stock prices can fluctuate dramatically daily, while FD returns remain fixed.
For tax purposes, FD interest up to ₹ 50,000 per year (₹ 1,00,000 for senior citizens) is exempt from TDS. But the interest itself is taxable as per your income slab. If your total income is below the basic exemption limit, you may not have to pay any tax.
As of January 2026, banks across different categories (public sector, private sector, and small finance banks) are offering competitive interest rates. In 2026, interest rates remain competitive, with banks and financial institutions offering between ~2.5% to 8% per annum on FDs.
To earn Rs. 50,000 per month from an FD, you need to consider the interest rate offered. For example, at an 8% annual interest rate, you'd need an FD of around Rs. 75 lakhs.
One way to take advantage of inflation is to invest when rates are higher. When interest rates rise, you may have a chance to lock in a better rate of return on a term deposit before they drop. Even in market conditions where inflation has peaked and trends downward, it's worth looking into.
In short, FDs are simpler, more secure and less liquid. Bonds, particularly corporate bonds, can offer higher returns but carry credit and market risk. Government bonds are generally considered very safe but offer lower yields. Learn more about what a bond is with Capital.com.
Can fraudsters take money from FD? Yes, fraudsters can misuse your sensitive information, such as OTPs or banking credentials, to access your funds. To prevent this, avoid sharing such details with anyone and always verify the authenticity of the institution.
Inflation Risk: FD returns may not always keep pace with inflation. Inflation erodes the purchasing power of your money over time, reducing the real value of your returns. For example, if your fixed deposit gives you a return of 6% and annual inflation is at 7%, your real rate of returns is -1%.