Every parent dreams of building a safe and secure financial future for their child. Among the many investment options available in India, a Fixed Deposit (FD) for a minor is one of the most reliable and straightforward ways to ensure financial stability while earning guaranteed returns.
Designed for children under 18, a minor FD allows parents or guardians to start their child’s financial journey early with the security of bank-backed, RBI-regulated savings. In this blog, we’ll cover the benefits, rules, interest rates, limits and tax implications of minor FDs, along with frequently asked questions.
What is a Fixed Deposit for a Minor?
A minor fixed deposit is a term deposit account opened by parents or legal guardians on behalf of their child (below 18 years). These FDs not only inculcate financial discipline but also create a secure financial corpus for a child’s education, higher studies, marriage or other life goals.
- The guardian manages the FD until the child reaches maturity.
- Once the child turns 18, the account is seamlessly converted into a regular FD under their name.
- RBI guidelines mandate proper documentation, ensuring transparency and security.
Minor Fixed Deposit Rules
Before opening a minor FD, it’s important to understand the rules and eligibility:
- Eligibility: Any child under 18 years can have an FD, managed by a parent, guardian or court-appointed guardian.
- Guardian’s Role: The guardian operates the account, makes deposits and manages withdrawals until the child becomes an adult.
- Documentation: Child’s birth certificate, guardian’s KYC, PAN/Aadhaar and sometimes Form 60/61.
- Nomination Facility: Available for added security in case of unforeseen events.
- Conversion at 18: Once the minor turns 18, the FD must be converted into a regular FD.
- Premature Withdrawal: Allowed by most banks, but may involve penalties.
- Auto-renewal Facility: Ensures continuity of savings without disruption.
Minor FD Interest Rate
The minor FD interest rate is usually at par with regular FDs. Some banks even offer slightly higher rates on children’s FDs to encourage long-term savings.
- Public sector banks: 6% to 7% p.a., depending on tenure.
- Private banks: Often 7% to 7.5% p.a. for longer tenures.
- NBFCs & fintechs: Some offer competitive rates and seamless booking via apps.
Minor FD Deposit Limits
Deposit limits depend on the bank or NBFC:
- Minimum Deposit: ₹1,000 – ₹10,000
- Maximum Deposit: Up to ₹10 lakh or higher, subject to bank scheme rules and RBI guidelines.
- Loan Against FD: Parents can avail loans against minor FDs for education or emergencies.
Is FD for Minors Taxable?
Yes, the interest from a minor’s FD is taxable. However, there are important provisions that make tax planning easier:
- Clubbing Rule (Section 64(1A)): A minor’s FD interest is clubbed with the higher-earning parent’s income.
- Exemption (Section 10(32)): Parents can claim a ₹1,500 exemption per child, per year.
- Form 15G/15H: Can be submitted to avoid TDS if the total income is below the taxable limits.
- Special Cases: If the child earns income independently (through skill/talent) or is differently abled, tax treatment may differ.
Benefits of Fixed Deposit for a Child
Investing in a minor FD provides several benefits:
- Safety & Security: Risk-free, market-independent growth of savings.
- Financial Discipline: Encourages systematic saving habits.
- Flexible Tenure: From a few months to 10 years, aligning with short- and long-term goals.
- Guaranteed Returns: Predictable interest ensures planning for education, marriage or career goals.
- Loan Facility: Loans against FDs provide emergency liquidity.
- Auto-renewal: Keeps the FD growing even after maturity until withdrawn.
- Digital Convenience: Platforms like Fibe, Navi, Cashe, Kreditbee and Kissht enable paperless FD booking.
Conclusion
A Fixed deposit for minors is a secure and effective way to invest in your child’s future. With attractive minor FD interest rates, flexible tenure options and guaranteed returns, it helps build a reliable financial foundation.
While there are certain minor fixed deposit rules and tax implications to consider, the benefits far outweigh the limitations. Download the Fibe App now and book your Fixed Deposit in just a few clicks. Enjoy flexibility, security and assured growth on your savings!
FAQs
1. Is FD for minors taxable?
Yes, but parents can claim up to ₹1,500 exemption per child annually under Section 10(32) and tax planning tools like Form 15G/15H can minimise liability.
2. Can I open an FD in my parents’ name?
Yes, but if the goal is child-specific savings, a minor FD is preferable since it is in the child’s name and converts to their ownership at 18.
3. Can I open a term deposit for my child?
Absolutely! Most banks and NBFCs offer minor FDs and fintechs like Fibe make it simple with instant booking.
4. Can NRIs open an FD for a minor?
Yes, but it must be in the form of an NRO account FD under RBI guidelines.
5. What happens if the guardian changes before maturity?
The new guardian can continue operating the FD after submitting valid documentation.
