Can Fixed Deposits Be Gifted? Rules and Options Explained

Gifting money is common in India. Whether it is a wedding, a child’s birthday, a graduation, or a major life milestone, people often gift cash or transfer money. But many people prefer gifting something more meaningful and long lasting. That is where a Fixed Deposit becomes an attractive option. An FD grows over time, is safe and gives the receiver a guaranteed financial benefit.

However, gifting an FD is not as straightforward as sending money through UPI or handing over a cheque. The process, rules, and tax implications depend on how the FD is created and whose name it is in. If you want to gift an FD the right way, it helps to understand the available options.

Here is a simple and complete guide explaining whether you can gift a Fixed Deposit, how it works, and what you should keep in mind.

Table of Contents

Can you Gift a Fixed Deposit?

Yes, you can gift a Fixed Deposit. The right method depends on whether you are creating a fresh FD for someone or trying to gift an existing one.

The cleanest and most common way is to open the FD directly in the name of the person you want to gift it to. This avoids ownership confusion and makes taxation straightforward. Alternatively, you can gift money that the other person uses to open an FD in their name. Both approaches are valid and widely accepted by banks.

What does not work is transferring an FD already created in your own name. Most banks do not allow FD name changes because the deposit is linked to your KYC, your bank account, and your signature.

How to Gift a Fixed Deposit to Someone

There are two correct ways to gift an FD.

Open a new FD Directly in the Recipient’s Name

This is the simplest and most transparent way to gift an FD. You fund the FD, but the deposit is held entirely in the other person’s name. They become the legal owner of the deposit and its interest.

Here is how this works:

You visit the bank or use online banking and open an FD using the recipient’s details.
The deposit amount moves from your account, but the FD certificate is issued in the recipient’s name.
The recipient earns the interest and is responsible for paying tax on that interest.

If the FD is for a child, the deposit is opened under the parent or guardian as the custodian. The FD automatically shifts to the child once they reach the age of 18.

This method is smooth, avoids questions later, and makes it clear that the FD is a gift.

Gift Money That the Recipient Uses for an FD

You can also transfer money as a gift, and the receiver can open the FD themselves. This method is helpful when you want them to choose the tenure or bank of their choice.

The tax rules are the same. The receiver pays tax on the interest because the deposit is in their name. This approach keeps the process simple and gives the receiver complete control over the FD.

Can You Gift an Existing FD?

Most banks do not allow you to transfer an existing FD to another person’s name. FDs are non-transferable because they are linked to your KYC, PAN, and bank account. They cannot be reassigned, even to family members.

If you truly want the other person to benefit from your FD, you have only one option.

You must:

Break the FD in your name.
Withdraw the amount.
Gift the money.
The recipient opens a fresh FD using the gifted amount.

However, breaking an FD early may come with penalties and loss of interest. The interest earned until the date of breaking it will be taxed as your income.

Tax Rules You Must Know Before Gifting an FD

Gifting money itself is not taxable. The tax impact depends on:

Who receives the gift
Who receives the interest
How much is being gifted

Here are the tax rules in simple words.

Tax on FD Interest

If the FD is in the recipient’s name, the interest is taxed as their income.
If you open the FD in your name and later gift the maturity amount, the interest is still taxed to you.

Gift Tax Rules

Under Indian tax laws:

Gifts to close relatives (child, parent, spouse, siblings) are not taxable regardless of the amount.
Gifts to non relatives are taxable if the value exceeds fifty thousand rupees in a year.

If you are gifting a large amount, it is always good to document the gift with a simple gift deed or keep clear bank transaction records.

Important Things to Remember When Gifting an FD

Gifting an FD requires planning. Keep these points in mind:

Always open the FD in the receiver’s name for clarity.
Inform the recipient about the interest taxability.
Choose a bank and tenure that suits the recipient’s financial needs.
If gifting a large amount, document it for safety.
Avoid transferring your own FD because most banks do not permit it.

Planning these steps ensures your gift is useful and hassle free.

Conclusion

Yes, you can gift a Fixed Deposit, and it is one of the most meaningful financial gifts you can give. The best method is to create the FD directly in the recipient’s name so that ownership, taxation, and control are clear from the beginning. Transferring an existing FD is not allowed, and breaking it early may lead to penalties, so it is better to plan the gift correctly from the start.

A well timed FD gift can help someone achieve an important milestone, build financial security, or save for a future need. It is a thoughtful gift that grows steadily and continues to deliver value long after the occasion has passed.