In India, we see elders giving cash to children as a gift, or parents putting money in a piggy bank for them. What if that same money could grow over time and be returned to your child with added interest when they grow up?
Fixed Deposits (FDs) and Recurring Deposits (RDs) make this possible. You can open a fixed deposit and gift it to a child today, and by the time the child reaches adulthood, they will receive not only the original amount but also the interest earned.
FDs and RDs aren’t just for children; they can be gifted to relatives, friends, or anyone you want to help save and grow their money.
To learn how gifting FDs or RDs works, who can receive them, and the rules and tax implications, read on.
What Does Gifting FDs & RDs Mean?
Gifting an FD or RD means giving someone a financial gift in the form of a bank deposit that earns interest until it matures.
The process is simple: you open a new FD or RD in the recipient’s name. The giver deposits the money, and the bank issues the deposit in the name of the person receiving the gift
How to Gift an FD/RD? Step-by-Step
Gifting an FD or RD is simple,
- Choose the bank giving high interest rate FDs or RDs
- Visit bank branch or use online banking
- Submit the recipient’s KYC details (ID proof, address, PAN)
- Deposit the gift amount and choose the tenure and interest payout option
- The bank will issue an FD/RD certificate in the recipient’s name
Note: The recipient’s signature is usually not needed unless it’s a large deposit or a special case. When you gift a fixed deposit to a child, the parent or guardian signs on their behalf.
For recurring deposits (RDs) the monthly deposit can be decided by the giver and the recipient. Some prefer to pay a larger first installment, while others continue with smaller monthly payments until the RD matures.
What are the Rules for Gifting FDs and RDs?
Gifting an FD or RD is a simple way to help someone financially. To make sure everything goes smoothly without any confusion, follow these basic rules
- Minimum deposit: Each bank has its own minimum deposit rules for FDs and RDs. Check this before gifting so that your deposit meets the bank’s rules and is accepted without any issues
- Tenure and interest: Decide the FD period, how long the deposit will stay in the bank and the interest payout option, if the interest is paid monthly, quarterly, or at maturity). It will impact on how much the recipient will receive at the end
- Premature withdrawal: If deposit are withdrawn before FD/RD maturity, the bank may charge a penalty or pay lower interest (some banks offer no penalty on premature withdrawal)
- Documentation: Keep all necessary documents, like a gift deed or assignment form, to stay out of any disputes later and for the gift to be legally recognized
- Joint accounts: If you open a Digital FD or RD jointly, banks may have different rules for ownership and how interest is shared
Tax Implications on Gift FDs and RDs
Even though FDs and RDs are given as gifts, they still come under certain tax rules in India. Here’s a simple way to understand them:
- Tax on gifts to family members: If you give an FD or RD to close family — parents, siblings, spouse, or grandparents, it’s completely tax-free, irrespective of the amount
- Gifts to non-family members: Gifts from people outside your family are tax-free only up to ₹50,000 in a year. Anything above that is considered income and the recipient has to pay tax on it
- Gifts to minors: When you gift a fixed deposit to a child, the interest earned is usually counted as the parent’s income for tax purposes
- Interest income and TDS: Any interest earned on FDs and RDs is taxable for the recipient. Banks may also deduct TDS if the total interest in a year exceeds ₹40,000 (₹50,000 for senior citizens)
Important tip: Check the recipient’s total income before gifting. This makes sure your gift doesn’t push them into a higher tax bracket or increase their taxes unnecessarily.
Final Thoughts
Gifting an FD or RD is a simple way to give something that lasts. Along with the joy of giving, it also adds a touch of financial security that grows over time.
Whether you gift a fixed deposit to a child, a family member, or a friend, knowing the basic steps, rules, and tax points helps you do it right.
With a little planning, your FD or RD gift can become a thoughtful gesture that supports someone’s future in a meaningful way.
