In 2026, Fixed Deposits have long become an established investment vehicle. Almost every major bank in India has various FD schemes in its product portfolio. Despite such widespread use, many myths still linger regarding FDs. These misconceptions either prevent people from investing in FDs or form a wrong perception of them. Therefore, such misconceptions need to be cleared. Let us understand what these are.
“Longer the tenure, higher the returns”
Fixed Deposit returns do not function like stocks. For stocks, longer holding periods do hold up, as compounding progressively increases value over time. For FDs, however, the maximum returns are provided for a medium-length tenure. Fixed Deposit interest rates usually peak around the 2 to 3 year mark, after which they decline. Therefore, for FDs, a longer tenure does not automatically guarantee higher returns.
“FD returns can never beat inflation”
This is not entirely true. It all depends on the scheme chosen. While FDs often provide lower returns in comparison to stocks and mutual funds, thorough research can help you secure a scheme that beats inflation. Some banks offer rates that are quite competitive against prevailing inflation levels.
“FDs are only for senior citizens”
While it is true that Senior Citizen FD rates are higher than for regular applicants, FDs are not only appropriate for that demographic. Fixed Deposits are highly stable, non-market-dependent investment instruments. They are one of the best assets for diversifying your portfolio. Therefore, anyone looking for stable returns on their investments will find FDs an ideal investment avenue.
“Returns from FD are not taxable”
This is also not true. Earnings from FDs are not categorised as ‘capital gains’ like stocks. However, they do come under ‘income from other sources’ and are added to your total annual income. Subsequently, you are taxed according to the relevant tax slab. Therefore, while the returns are categorised under different headings, neither is exempt from taxes. You can, however, claim deductions if you fulfil certain criteria.
“You can buy many stocks, but only book a single FD”
Contrary to this myth, there is no restriction on the number of FDs an applicant can book. It is recommended to employ a strategy called 'laddering.' Under this approach, instead of having a single long-tenured FD, you distribute your funds across FDs with different tenures. This helps you maximise liquidity and returns while reducing reinvestment risk.
“Your FD is gone, if the bank is gone”
RBI's DICGC, insures all bank deposits up to Rs. 5 lakh per investor. Therefore, you will never lose your entire FD amount in the event of the bank’s insolvency. Moreover, opting for only the major banks can minimise your risk.
Conclusion
The misconceptions discussed above often hinder people from seeing a clear picture of Fixed Deposits. While FDs do have their disadvantages, such myths prevent people from understanding the intricacies.
Furthermore, people mustn't heed unverified statements and jargon. Rather, visiting official bank websites, comparing schemes, and understanding interest rate charts are the right courses of action.
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