Can You Gift a Fixed Deposit?

Money as a gift is a typical way to help someone out, especially during weddings or other big celebrations. Most of the time, people send money or provide cash, but a lot of people think about giving a fixed deposit (FD) instead, since they think it’s a bigger and better gift. You can give someone an FD as a present, but the way you do it is really important. A fixed deposit is a safe and dependable method to put money to work. It’s harder to give someone an FD than it is to write a check or make a UPI payment because you need to know their bank account number and other private information.

Opening an FD in Someone Else’s Name

The easiest and cleanest way to gift a fixed deposit is by opening it directly in the recipient’s name. Most banks allow you to create an FD for your spouse, children, parents, or even friends. You simply fund the deposit, and the bank issues it in their name. The recipient becomes the legal owner and is responsible for any tax on the interest earned. If the recipient is a minor, you can still open the FD under the name of a parent or guardian, and it automatically transfers to the child once they turn 18.

This method is simple, transparent, and avoids future confusion over ownership or taxation. It’s especially useful when gifting for long-term goals like education or retirement planning.

Can You Transfer an Existing FD?

If you’ve already created an FD in your name and now want to gift it, most banks do not allow a name transfer. Fixed deposits are non-transferable because they are linked to your bank account and KYC details. You can’t simply shift it to someone else. What you can do is break the FD, withdraw the money, and then gift that amount to the person. However, this comes with a few downsides: you may lose interest through premature withdrawal penalties, and the FD interest rates applied will be lower than expected if broken early.

So, while it’s possible to gift the value of the FD, you’ll lose some benefits, and the interest earned until then will still be counted as your income.

Tax Rules for Gifting FDs

If you gift money that’s used to create an FD, the recipient is taxed on the interest—not you. However, if you open the FD in your name and later give the maturity amount, then the interest still counts as your income. The Income Tax Act also states that gifts to relatives (like parents, children, or spouse) are not taxable, but gifts to non-relatives above ₹50,000 in a financial year can be taxed as income in the hands of the receiver.

To avoid confusion, it’s a good idea to document large gifts through a bank record or a simple gift deed, especially when the amounts are high.

Gifting FDs for Milestones

FDs can be a meaningful gift for important life events. You can use them for children’s education, retirement planning for elders, or as a wedding gift. With rising FD interest rates, they offer predictable growth, unlike market-linked investments. Laddering multiple FDs with different maturities can also help spread out access to funds over time. 

Conclusion

Yes, you can gift a fixed deposit but the best way is to open it in the recipient’s name from the beginning. That keeps ownership, taxation, and control clear. Transferring an existing FD isn’t allowed, and breaking it early can cost you in interest and penalties. If you want to gift financial security in a way that grows over time, an FD is a thoughtful option, as long as it’s planned the right way. It’s a gift that quietly earns, stays safe, and can make a real difference down the line.