Difference Between Time Deposit and Fixed Deposit

Fixed Deposit (FD) is a type of time deposit. Time deposits are a broad category, while FDs involve lump-sum investment with fixed interest rates and withdrawal rules.
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Time Deposit vs Fixed Deposit
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3 mins
09-June-2026

Fixed deposits (FDs) have long been considered one of the safest and most popular investment options. However, many investors often confuse fixed deposits with time deposits. While the two investment options may appear similar, there are significant differences between the two.

What are fixed deposits?

Fixed deposits (FDs) are a type of term deposit account that offers a fixed interest rate to investors for a fixed term. FDs are a safe and popular investment option, offering higher interest rates than regular savings accounts. The duration of an FD can vary, with interest rates varying depending on the financial institution. Bajaj Finance Fixed Deposit offers a higher interest rate in addition to the trust of the brand. Our FDs are secure as they are backed by CRISIL AAA/STABLE and [ICRA]AAA ratings.

Pro tip

Bajaj Finance offers attractive Fixed Deposit interest rates of up to 7.40% p.a. for non-senior citizens, and up to 7.75% p.a. for senior citizens, inclusive of an additional rate benefit of up to 0.35% p.a.

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Benefits of fixed deposit

Fixed deposits are a popular investment option because of their low-risk nature. Unlike other investment options, FDs provide guaranteed returns regardless of market fluctuations. Additionally, FDs can be used as collateral for loans or other financial instruments, making them a versatile investment option. If you have opened a Bajaj Finance Fixed Deposit, you can also get a loan against your FD during any emergency.


Also read: What is fixed deposit


What is time deposit?

Time deposits or term deposits are investment options offered by financial institutions. In a term deposit account, a fixed amount of money is invested for a fixed term at a fixed interest rate. The interest rate on term deposits generally varies, depending on the financial institution. Term deposits are also known as certificates of deposits or recurring deposits. In this, customers can examine the terms of a term deposit on paper statements. The statement covers the required minimum principal amount, the rate of interest paid, and the period to maturity of the deposit, as agreed upon by the depositor and the bank at the outset.

 

Benefits of time deposit

The biggest advantage of a time deposit is that it is a low-risk investment option. Additionally, time deposits provide good returns over the investment period. The lock-in period for a time deposit can range from one month to five years, depending on the financial institution. Investors can choose the lock-in period that best suits their investment goals and risk appetite.

 

Difference between time deposit and fixed deposit

Both term deposits and fixed deposits offer fixed interest rates that help provide stable and predictable returns. They also come with competitive rates and flexible tenure options, allowing investors to choose plans based on their financial goals and time horizon.

Term deposits may sometimes include variable maturity structures and comparatively lower interest rates depending on market conditions. In contrast, ICICI Bank Fixed Deposits generally offer relatively higher fixed interest rates with defined tenures and structured payout options.

FeaturesTerm depositFixed deposit
Interest ratesMay have fixed or variable rates depending on market conditionsFixed interest rate throughout the tenure
Deposit tenureDepends on the type of deposit selected7 days to 10 years with ICICI Bank
Charges on premature withdrawalYesYes
FlexibilityGenerally more flexible compared to traditional FDsOffers similar flexibility with structured terms
ReturnsMay offer relatively lower returnsMay provide comparatively higher returns
RenewabilityUsually cannot be renewedCan be renewed at maturity
Investor suitabilitySuitable for short term investorsSuitable for both short and long term investors

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Tax implications on time and fixed deposits

The interest earned on both time deposits and fixed deposits is taxable according to the investor's applicable income tax slab. Financial institutions may deduct Tax Deducted at Source (TDS) if the annual interest exceeds the prescribed threshold under the Income-tax Act. Investors should evaluate the post-tax returns and applicable tax rules before selecting a deposit option to maximise overall returns.

 

Conclusion

Both time deposits and fixed deposits are suitable investment options for individuals seeking capital protection and predictable returns. The right choice depends on your financial goals, liquidity requirements, investment tenure, and income needs. By comparing features such as interest rates, flexibility, tax implications, and withdrawal conditions, you can select the deposit option that best supports your long-term financial planning.

Calculate your expected investment returns with the help of our investment calculators

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FD CalculatorSukanya Samriddhi Yojana CalculatorPPF CalculatorRecurring Deposit CalculatorPF CalculatorGratuity Calculator

Frequently asked questions

Is time deposit a good investment?

Yes, time deposits are a good investment for those seeking a low-risk option with guaranteed returns. They offer fixed interest rates and are ideal for conservative investors.

What are the disadvantages of time deposit?

Time deposits have limited flexibility because funds remain locked until maturity, and early withdrawal may lead to penalties or reduced interest. Investors also cannot add more money during the tenure and may miss higher interest opportunities if market rates rise.

How long can you keep a time deposit?

A time deposit can usually be held for a fixed period ranging from a few months to several years, depending on the bank’s terms. During this tenure, funds remain locked, and early withdrawal may involve penalties or reduced returns.

What is an example of a time deposit?

An example of a time deposit is a certificate of deposit (CD) where funds are deposited for a fixed term, such as one year, earning a specified interest rate.

Can you withdraw a time deposit?

Yes, you can withdraw a time deposit before its maturity, but it usually incurs a penalty for early withdrawal, reducing the overall interest earned.

Is time deposit guaranteed?

Yes, time deposits are generally guaranteed, as they are backed by financial institutions and often insured by government schemes up to a certain limit.

What is another name for time deposits?

Another name for time deposits is "term deposits," referring to the fixed term for which the money is deposited.

Can you lose money in a time deposit?

Time deposits are generally considered low-risk investments. While your principal is typically protected, premature withdrawals, penalties, inflation, or taxation may reduce your overall returns.

Who should invest in time deposits?

Time deposits are suitable for conservative investors seeking stable returns, capital protection, and predictable income. They are ideal for individuals with short- to medium-term financial goals and a low risk appetite.

Are fixed deposits and time deposits the same?

A fixed deposit is a type of time deposit. While all fixed deposits are time deposits, the term "time deposit" broadly refers to any deposit held for a fixed tenure with a financial institution.

What is the tenure for fixed and time deposits?

The tenure for fixed and time deposits varies by financial institution, typically ranging from 7 days to 10 years, allowing investors to choose a period that aligns with their financial objectives.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.