FD vs CD: India Has Both, and They Are Not the Same

Type "FD vs CD" into Google from Delhi and every result answers a question about Indian money markets. Type it from Chicago and the phrase barely parses. Both audiences think they're asking the same thing. They aren't, and almost nobody says so.

India has a fixed deposit. India also has a certificate of deposit, and under the RBI's own rules it's a completely different animal: a negotiable money market instrument, minimum ₹5 lakh, maximum one year, held in demat form and sold on the secondary market, never broken at a branch counter. The American certificate of deposit is the thing that actually resembles an Indian FD. So there are three instruments here, not two, and the naming collides in the middle.

This post draws that three-way map, then covers what these deposits actually pay (both countries publish an honest number that nobody quotes), what breaking one really costs, how the interest is taxed, and why a brokered CD's headline rate isn't comparable to a bank's. It explains the instruments. It isn't a recommendation to open one, and it doesn't tell you which bank to use.

What is a fixed deposit?

A fixed deposit is a time deposit: a lump sum placed with a bank for a fixed tenure at an interest rate locked on the day you book it. The rate doesn't move for the life of the deposit, whatever the bank publishes tomorrow.

Three properties define it. The rate is fixed at booking, so a 7% FD stays a 7% FD even if the bank's board drops the card rate to 6% the following week, and equally you don't capture a rise without breaking the deposit. The tenure is fixed, running 7 days to 10 years in India and roughly 3 months to 5 years in the US. And the maturity date is the only day you can take the money without a penalty.

Indian FDs compound quarterly by convention and are quoted as a nominal rate plus a compounding frequency. American CDs are quoted as APY, the annual percentage yield, which already folds the compounding in. That difference makes the headline numbers non-comparable as printed, and it's a trap we walked into ourselves: our own FD calculator used to tell people to enter an APY and pick a compounding frequency, which counts the compounding twice. It's fixed now.

Both are covered by deposit insurance, ₹5 lakh per depositor per bank under the DICGC in India and $250,000 at an FDIC-insured bank in the US. The mechanics, the ownership-category rules, and the payout timelines belong to our deposit insurance explainer. One detail from it is worth carrying here because it bites FD holders specifically: the DICGC's ₹5 lakh ceiling covers principal and interest combined, so a deposit of exactly ₹5,00,000 has none of its interest insured.

Is a certificate of deposit the same as a fixed deposit?

In India, no. They're two separate instruments, and the RBI regulates the CD as a money market security while the FD is a retail deposit. This is the single most-confused point on the topic, and I've yet to find a page that states it cleanly.

The RBI's Master Direction (Certificate of Deposit) Directions, 2021 defines an Indian CD as a negotiable, unsecured money market instrument issued by a bank as a usance promissory note against deposited funds, for a maturity of up to one year. The specifics rule out almost every retail saver:

	Indian fixed deposit	Indian certificate of deposit	US certificate of deposit
What it is	A retail bank deposit	A negotiable money market instrument	A retail bank deposit
Minimum	Often ₹1,000, sometimes less	₹5 lakh, in multiples of ₹5 lakh	Often $500 to $1,000
Tenure	7 days to 10 years	7 days to 1 year, no longer	~3 months to 5 years
Form	An account with the bank	Dematerialised, held with a depository	An account with the bank
How you exit early	You break it and pay a penalty	You sell it on the secondary market	You break it and forfeit interest
Who buys it	Anyone	Corporates, treasuries, institutions	Anyone
Rate quoted as	Nominal plus compounding	Market-determined	APY

Read the "how you exit early" row twice, because it's the cleanest tell. An Indian FD and a US CD both have an early-withdrawal penalty, because both are deposits with a bank that agreed to hold your money. An Indian CD has no penalty at all, because there's nothing to break: it's a tradable security, and you exit by finding a buyer at whatever price the market offers.

So the American reader asking "FD vs CD" is comparing two words for approximately one product. The Indian reader asking the same question is comparing a savings instrument to a wholesale funding instrument they will almost certainly never own. Both land on pages that answer the other one's question.

Our own earlier version of this page told readers the difference was "purely regional convention" and that "the financial product is the same." That's true across the India-US border and false inside India, and stating it without the distinction was an error worth correcting plainly.

What do fixed deposits and CDs actually pay?

Both countries publish an honest, dated average of what depositors really earn, and essentially nobody cites either one. The gap between those figures and the numbers the field headlines is the most useful thing on this page.

Start with India, where the RBI puts it on its own front page. As at 1pm on 17 July 2026, sourced to FBIL, the RBI publishes the term deposit rate for tenures over one year at 6.00% to 6.70%, alongside a savings deposit rate of 2.50%. That's the band, from the regulator, timestamped to the hour.

Against that, State Bank of India's own published card rates, effective 15 December 2025, top out at 6.40% for the general public, with 6.25% on 1 to 2 years and 6.05% on 5 to 10 years. ICICI Bank's page says "up to 6.50%." Public sector banks reached 6.85% and small finance banks 7.50% to 8.10% as at 24 June 2026, per Business Today's survey. The RBI's repo rate sits at 5.25%, cut there on 5 December 2025 and held through three subsequent meetings.

There's a second RBI figure almost no one has written about, and it's the sharpest number in this post. RBI's data reported on 30 June 2026 puts the weighted average domestic term deposit rate on fresh rupee deposits at 5.84% in May 2026, while the rate on outstanding deposits was 6.57%. That spread is the cost of the rate cycle, quantified: money already locked in is earning about 73 basis points more than money going in today.

The US mirror is starker. The FDIC publishes national deposit averages monthly, and as of 15 June 2026 the national average 12-month CD paid 1.65%. The 36-month average was 1.33%, the 60-month 1.35%. Meanwhile the best advertised CD rate we could find anywhere was 4.40%, and the field's coverage is built almost entirely on numbers like that one. The headline is roughly two and a half times the national average. Both figures are true. Only one describes what Americans are actually earning.

The Federal Reserve's target range is 3.50% to 3.75%, cut there on 11 December 2025 and held at four consecutive meetings since. Which produces a symmetry worth noticing: the RBI paused on 5 December 2025 and the Fed on 11 December, six days apart, and both have held ever since. The tails point in opposite directions, though. The RBI has raised its inflation projection to 5.1%, while two Fed governors dissented in January wanting a further cut. The next decisions land on 28 to 29 July for the Fed and 3 to 5 August for the RBI, both within weeks of this being written.

You'll notice this post has no bank-by-bank rate table. That's deliberate, and it's the same standard our recurring deposit explainer sets: a rate table we can't date honestly is worse than no table at all. When we went looking, HDFC's and Axis's own rate pages rendered as empty shells, Ally's page printed "APYs are accurate as of ." with the date missing, and Capital One's rendered its rates as "NaN". The aggregators that do publish tables were worse: one carried a header stamped "Updated On 17 Jul 2026" over rates dated 7 April. Rates move quarterly, this post won't, and the RBI and FDIC figures above are dated, primary, and checkable.

What does breaking a deposit early actually cost?

In India you don't lose a fixed penalty; you get repriced to the rate that applied on your booking date for the time you actually stayed, minus a penalty, or your contracted rate minus a penalty, whichever is lower. That clause is the reason the answer surprises people, and I couldn't find it explained on a single ranking page.

State Bank of India's own terms, in force since April 2017, set the penalty by amount: 0.50% on retail deposits up to ₹5 lakh, and 1% above ₹5 lakh and below ₹1 crore. So the flat "1% penalty" the field publishes is the worst case, not the norm, and it's wrong for most retail depositors at India's largest bank. No interest at all is paid if the deposit is broken inside 7 days.

ICICI Bank tiers the same penalty by tenure instead: 0.50% under a year, 1.00% from one to five years, and 1.00% to 1.50% beyond. So the two structures differ in kind and not only in size, which is a thing no page mentions while all of them assert a single "0.5% to 1%" range.

Work it through with real numbers. Say ₹1,00,000 booked at 7% for five years, broken at six months, when the bank's 6-month card rate on the booking date was 6%:

Step	Calculation	Result
Path A: booking-date rate for the period held, minus penalty	6.00% minus 0.50%	5.50%
Path B: contracted rate, minus penalty	7.00% minus 0.50%	6.50%
SBI pays whichever is lower	lower of 5.50% and 6.50%	5.50%

The version of this page you'd have read in May used the card rate at withdrawal and a flat 1% penalty, and arrived at 5%. Both inputs were wrong. In a cutting cycle the booking-date rate and today's rate diverge materially, so the distinction isn't academic.

The US works differently: banks forfeit a stated number of days of interest, tiered by tenure and set individually.

Bank	Penalty schedule	Can it reach principal?
Ally	30 days under 3 months, rising to 150 days at 49 months or more	Yes, from accrued interest first and then principal if needed
Chase	90 days under 6 months, 180 days to 24 months, 365 days beyond	No, capped at interest earned
Capital One	3 months of interest up to a 12-month term, 6 months beyond	Not stated

The true range is 30 to 365 days, wider at both ends than the "3 to 6 months" our own page used to state. But the row that matters isn't the number. Ally says the penalty comes out of accrued interest first and then, if necessary, out of principal. Chase caps it at the interest earned. Breaking a CD early can return you less than you put in at one bank and never at the other, and I found no page in the field that makes the comparison.

How is deposit interest taxed?

In India, FD interest is taxable at your slab rate with tax deducted at source; in the US, CD interest is taxable as ordinary income, but which form it lands on depends on how the CD pays.

India first. Interest is added to total income and taxed at slab. TDS applies at 10% once interest from one bank crosses ₹50,000 in a financial year, or ₹1,00,000 for a senior citizen, thresholds Budget 2025 raised from ₹40,000 and ₹50,000 with effect from 1 April 2025. Without a PAN it's 20%. The mechanics live in our TDS explainer.

The five-year tax-saver FD is a variant worth knowing exists, because it trades liquidity for a deduction: the lock-in is absolute, with no premature withdrawal permitted at all and no loan available against it. The deduction it earns was Section 80C under the 1961 Act and is now Section 123 read with Schedule XV of the Income Tax Act 2025, in force since 1 April 2026, and it remains available only under the old regime. Every ranking page we read still cites "Section 80C of the Income Tax Act, 1961." The deduction itself belongs to our 80C explainer.

The American side is stranger than it looks, and the IRS says something most explainers skip. Publication 550 treats a CD as a debt instrument, and states that if you buy one with a maturity of more than a year, you must include part of the total interest in income each year and report it the same way as original issue discount. It applies the same rule to time deposits, savings certificates, and growth savings certificates.

Read literally, that's a rule about the length of the CD. In practice most retail CDs credit interest monthly or quarterly, and interest that's actually payable at least annually is what the rules call qualified stated interest, which is why the form that reaches your mailbox is nearly always a 1099-INT rather than a 1099-OID. The paperwork differs. The outcome doesn't:

What you hold	What lands in the post	When you owe tax
A CD crediting interest monthly or quarterly, which is most of them	1099-INT	Each year, as the interest is credited
A CD over one year that pays everything at maturity	1099-OID	Each year, on the accrued portion, before you see a rupee or a cent of it

So on any deposit running longer than a year, in either country, you are taxed on interest before you can spend it. That's the part worth carrying. Which form arrives, and which rule your particular CD falls under, is exactly the kind of question a CPA should answer for your own return.

What is a brokered CD, and why isn't its rate comparable?

A brokered CD is a certificate of deposit you buy through a brokerage, and its advertised rate is not comparable to a bank CD's APY. This matters because brokered CDs usually sit at the top of the rate tables, including in the version of this page we published in May.

Fidelity states the mechanics plainly. Brokered CDs pay simple interest, which is deposited into your cash account, so it never compounds inside the deposit. So a 4.40% brokered CD and a 4.40% APY bank CD are not the same offer: over five years the bank CD wins unless you actively reinvest every payment at the same rate.

There's no early-withdrawal penalty, which sounds like an advantage and is really a substitution. You exit by selling on the secondary market, where Fidelity warns the sale is subject to a mark-down and may produce a substantial gain or loss from interest rate movements. You've traded a known penalty for unknown principal risk.

And many are callable: the issuer can redeem before maturity, paying par or a percentage of it. Fidelity is candid that this buys you a potentially higher rate now in exchange for the risk of the CD being taken away. Think about when an issuer would exercise that. Rates fall, cheaper funding appears, the call gets pulled, and you're handed your money back to reinvest at the new lower rate. With both central banks paused after a cutting cycle, the highest advertised long CD on any comparison page is also the one least likely to still be paying that rate in three years. Our own May version listed a brokered CD as the top US rate and described it as offering "more tenure flexibility," with no mention of callability, principal risk, or the missing compounding. That was the most misleading line on the page.

What this post does not cover

This explains the instruments. It doesn't rank banks, recommend a product, or tell you what to do with a lump sum, and it deliberately carries no bank-by-bank rate table for the reasons given above. Laddering, sweep-in FDs, NRE and FCNR deposits, and corporate or NBFC deposits are out of scope, though one point about that last category is worth stating since the field obscures it: deposits with NBFCs and corporates carry no DICGC cover at all, and pages listing them beside bank FDs without saying so are misdescribing the risk. Deposit insurance mechanics belong to FDIC vs DICGC, monthly-instalment saving to recurring deposits, the compounding mechanism to compound interest, and the liquid alternatives to savings accounts and high-yield savings. For the wider pillar, see banking basics.

On sourcing, since this page turns on rates and tax. The RBI term-deposit band, the repo rate, the CD Master Direction, SBI's penalty terms and card rates, ICICI's penalty tiers, the FDIC national averages, the Federal Reserve's target range, Bank of America's rates, and Fidelity's brokered-CD disclosures were each read from the institution's own page. Four limits are worth naming. The Income Tax Act 2025's renumbering of 80C to Section 123 is verified across several tax publishers but not from the Act itself, because the Income Tax Department's site blocked every route we tried. The IRS Publication 550 wording on CDs was read from Publication 550 itself. The weighted average deposit rates come from outlets reporting RBI's 30 June 2026 release; RBI's own document sits behind a CAPTCHA. And a proposal to raise DICGC cover from ₹5 lakh has been discussed publicly but is not enacted; the limit today is ₹5 lakh.

Frequently asked questions

Is a certificate of deposit the same as a fixed deposit? It depends which country you mean, and this is the question the internet gets wrong. In India they are two different instruments. Under the RBI's Master Direction (Certificate of Deposit) Directions, 2021, an Indian CD is a negotiable, unsecured money market instrument issued as a usance promissory note, with a minimum denomination of Rs 5 lakh, a tenor between seven days and one year, held in dematerialised form and tradable on the secondary market. An Indian fixed deposit is none of those things: it has no minimum near that size, runs up to ten years, and you exit it by breaking it rather than selling it. The US certificate of deposit, on the other hand, is the instrument closest to an Indian FD. So an American comparing FD and CD is comparing two names for roughly one product, while an Indian comparing them is comparing two genuinely different instruments.

What is a fixed deposit? A fixed deposit is a time deposit: a lump sum placed with a bank for a fixed tenure at an interest rate locked on the day you book it. The rate does not move for the life of the deposit even if the bank's published rates change the next day, which cuts both ways. Indian tenures run from 7 days to 10 years, interest is usually compounded quarterly, and the deposit is covered by DICGC insurance up to Rs 5 lakh per depositor per bank, covering principal and interest combined. The American equivalent is the certificate of deposit, which works the same way but is quoted in APY and runs typically from 3 months to 5 years.

What do fixed deposits and CDs actually pay right now? Less than the headline numbers suggest, in both countries. The RBI's own front page put the term deposit rate for tenures over one year at 6.00% to 6.70% as at 17 July 2026, sourced to FBIL. State Bank of India's published card rates top out at 6.40% for the general public, and small finance banks reached 7.50% to 8.10% as at 24 June 2026. In the US the FDIC publishes a national average, and as of 15 June 2026 the average 12-month CD paid 1.65% while the best advertised offers sat near 4.40%. Both markets anchor their coverage on the best available rate rather than the typical one.

What does breaking a fixed deposit early cost in India? Less than most pages claim, and calculated differently than they describe. State Bank of India's own terms set the penalty at 0.50% for retail deposits up to Rs 5 lakh and 1% above that, so the commonly published flat 1% is the worst case rather than the norm. The mechanism matters more than the number: SBI pays the lower of the rate applicable at the time of deposit for the period the money actually stayed, minus the penalty, or the contracted rate minus the penalty. It is the booking-date card rate for the tenure you actually held, not today's rate. ICICI Bank tiers its penalty by tenure instead of by amount, at 0.50% under one year and 1.00% from one to five years, so the structure differs between banks in kind and not only in size.

What does breaking a US CD early cost? Between 30 and 365 days of interest, tiered by tenure, and set by each bank rather than by a common rule. Ally's schedule runs from 30 days of interest on a CD under three months to 150 days on a term of 49 months or more. Chase runs 90 days under six months, 180 days from six to 24 months, and 365 days beyond that. Capital One uses three months up to a 12-month term and six months beyond it. One difference matters more than the numbers: Ally states that the penalty comes first from accrued interest and then, if necessary, from principal, while Chase caps the penalty at the interest earned. So an early exit can return less than you deposited at one bank and never at the other.

Is fixed deposit and CD interest taxable? Yes, fully, as ordinary income in both countries. In India, FD interest is added to your total income and taxed at your slab rate, with TDS at 10% once interest crosses Rs 50,000 in a financial year from one bank, or Rs 1,00,000 for senior citizens, both thresholds raised by Budget 2025 from 1 April 2025. Without a PAN, TDS runs at 20%. In the US, IRS Publication 550 treats a CD as a debt instrument and says that if you buy one with a maturity of more than a year you must include part of the total interest in income each year, reported the same way as original issue discount. In practice most retail CDs credit interest monthly or quarterly, and interest payable at least annually is qualified stated interest, so the form that arrives is nearly always a 1099-INT rather than a 1099-OID. The paperwork differs; the outcome does not. On any deposit running longer than a year you are taxed on the interest before you can spend it.

What is a brokered CD, and is its rate comparable to a bank CD? A brokered CD is a certificate of deposit sold through a brokerage rather than opened at a bank, and its rate is not directly comparable. Fidelity states that brokered CDs pay simple interest which is deposited into your cash account, so unlike a bank CD the interest does not compound inside the deposit. That alone makes a 4.40% brokered CD worth less over five years than a 4.40% APY bank CD unless you reinvest every payment. There is no early withdrawal penalty because there is no early withdrawal: you sell on the secondary market, where Fidelity warns the sale is subject to a mark-down and a substantial gain or loss from interest rate changes. Many are also callable, meaning the issuer can redeem early, which it has reason to do exactly when rates fall.

Sources

• Reserve Bank of India, Master Direction (Certificate of Deposit) Directions, 2021 (the Indian CD's definition, ₹5 lakh minimum, 7-day to 1-year tenor, and secondary-market trading) rbi.org.in
• Reserve Bank of India, Policy rates and FBIL term deposit rates (the 6.00% to 6.70% band, as at 17 July 2026) rbi.org.in
• Reserve Bank of India, Monetary Policy Statement, 5 June 2026 (repo held at 5.25%) rbi.org.in
• State Bank of India, Premature withdrawal penalty terms (0.50% up to ₹5 lakh, 1% above, and the whichever-is-lower rule) sbi.bank.in
• State Bank of India, Retail domestic term deposit rates, effective 15 December 2025 sbi.bank.in
• ICICI Bank, FD interest rates and premature withdrawal terms (penalty tiered by tenure) icici.bank.in
• Federal Deposit Insurance Corporation, National Rates and Rate Caps, as of 15 June 2026 (the 1.65% national average 12-month CD) fdic.gov
• Federal Reserve, FOMC statement, 17 June 2026 (target range held at 3.50% to 3.75%) federalreserve.gov
• Fidelity, Certificates of deposit (brokered CDs pay simple interest, secondary-market mark-down, and call risk) fidelity.com
• Deposit Insurance and Credit Guarantee Corporation, Guide to deposit insurance (₹5 lakh covering principal and interest combined) dicgc.org.in
• Internal Revenue Service, Publication 550, Investment Income and Expenses (a CD is a debt instrument; the more-than-one-year rule) irs.gov
• Internal Revenue Service, Publication 1212, Guide to Original Issue Discount Instruments (qualified stated interest, and OID on CDs) irs.gov