Fixed deposits for children: opening an FD in your child's name

A parent or legal guardian can open a fixed deposit (FD) in a child's name at any age. An FD is money placed with a bank and repayable at the end of a fixed period. They run it until the child turns 18. A minor is anyone under 18, and a guardian is the adult the law lets act for the child. The catch is tax. While your child is a minor, the interest is added to a parent's income, apart from ₹1,500 a year. It is then taxed at that parent's slab rate, the rate for the band of income they fall in. It makes no difference who put the money in.

Can you open a fixed deposit in your child's name?

Yes. RBI's rules let a minor of any age hold a savings or term deposit through a natural or legal guardian. The mother can be the guardian. A term deposit is the bank's name for an FD. RBI's current directions on this apply from 1 July 2025.

You will need the bank's KYC, the identity checks every bank must complete. That means an identity and address document such as Aadhaar, a passport or a voter ID, and your PAN (permanent account number). If there is no PAN, the bank takes a declaration in Form No. 97 instead. From the age of 10, a bank may let a child open and run a deposit alone. The amount and terms are the bank's to set.

Post office deposits follow a similar pattern. A guardian can open one for any minor, and a minor who has turned 10 can open one too.

Who runs the FD, and what changes when your child turns 18?

The guardian runs the FD until the child turns 18. A minor's account may never be overdrawn.

At 18, the bank takes the new adult's own instructions and specimen signature and keeps them on record. If the guardian had been operating the account, the balance is confirmed, and the guardian's role ends. The bank also takes fresh photographs and may redo the KYC.

The tax changes on the same day. Interest that arises after the 18th birthday is the child's own income, not a parent's.

How is interest on a child's FD taxed?

Until your child turns 18, the FD interest counts as the income of the parent who earns more. The first ₹1,500 a year for each child is left out. It is taxed at that parent's slab rate. Tax people call this clubbing: a child's income is added, or clubbed, with a parent's.

The rule is in section 99 of the Income-tax Act, 2025 (the old section 64(1A)).

• Which parent. The parent whose total income, before the child's income is added, is greater, if the parents are married. If they are not married, it is the parent who maintains the child during the tax year.
• It stays put. Once the income is added to one parent, it stays with that parent in later years. The Assessing Officer, the tax official who assesses the return, can decide otherwise after hearing the other parent.
• The ₹1,500. The first ₹1,500 a year for each child whose income is added is exempt under Schedule III (the old section 10(32)).
• What is not added. Income the child earns from their own work, or from activities that use the child's skill, talent, specialised knowledge or experience, is not added. Nor is the income of a child with a disability of the kind described in section 154.

Take grandparents in Nagpur who give ₹2,40,000 for their 7-year-old grandson. His parents put it in an FD in his name. Assume it pays 7% a year, paid out yearly. That rate is an assumption for the example, not a quote from any bank.

Cess is an extra 4% charged on the tax itself. The ₹3,182 assumes the parent has chosen the old regime, which applies only if they opt out of the default one. Their income must stay between ₹5 lakh and ₹10 lakh both before and after the ₹15,300 is added. The ₹4,774 assumes their income is above ₹10 lakh in the old regime, or above ₹24 lakh in the default regime, before it is added. Both assume total income stays at or below ₹50 lakh, so there is no surcharge. Surcharge is an extra charge on the tax once total income passes ₹50 lakh.

The money came from the grandparents, yet the income is the parent's to show.

What if the FD is cumulative, meaning it pays interest only at the end? On the accrual basis, interest counts in the year it is earned, not the year it is paid. Each year's share is then added to the parent's income that year, less ₹1,500. For how FD interest is taxed in general, see taxation on fixed deposits.

Does the bank deduct TDS on a child's FD, and whose PAN does it use?

The bank deducts TDS only once the FD interest it credits crosses ₹50,000 in a year. A child with no taxable income quotes a parent's or guardian's PAN. TDS is tax deducted at source: the bank deducts 10% of the interest before the money reaches you.

The ₹50,000 counts all FD and recurring deposit (RD) interest the bank credits to that depositor in the tax year, across branches. In the Nagpur example the interest is ₹16,800, so the bank deducts nothing, assuming no other interest from that bank in the child's name. The tax is still due, through the parent's return.

On the PAN side, a time deposit above ₹50,000 needs a PAN or a Form No. 97 declaration. So do time deposits adding up to more than ₹5,00,000 in a financial year. The ₹2,40,000 FD is above that line. The rules also say a minor with no income chargeable to tax quotes the PAN of the father, the mother or the guardian, as the case may be.

Normally, if your total income is not taxable, you can give the bank a declaration, Form 121, to stop the deduction. Not so for a child's FD. The person giving Form 121 states that the income is not includible in anyone else's total income under sections 96 to 99. Interest that is clubbed with a parent's is exactly that, so no Form 121 can be given in the child's name.

If TDS is cut, the parent can still take the credit. That needs a declaration under rule 203(2) of the Income-tax Rules, 2026, given to the bank. It names the person in whose hands the income is assessed, with name, address and PAN. The credit then goes to that person instead of the child. It does not move on its own.

Can grandparents open an FD for a grandchild?

Grandparents can give the money. But while the child is under 18, the interest on an FD in the child's name is still added to a parent's income. Who paid does not change that. The rule reaches income arising to the minor child, and it is not limited to money a parent gave.

RBI's rules let a natural or legal guardian, or the mother, open a minor's FD. A grandparent who is neither can keep the FD in their own name and name the grandchild as nominee. The grandparent can also appoint an adult to receive the money for the child, if the grandparent dies while the child is a minor.

In that case the interest is the grandparent's own income, because the FD is not in the child's name.

Can a child's FD be a tax-saving FD?

A 5-year tax-saving FD can be held jointly by an adult and a minor, but only the first holder gets the deduction. The first holder is the person named first on the deposit.

A tax-saving FD is a 5-year bank deposit of ₹100 to ₹1.5 lakh a year. Under the old regime, it counts towards section 123 (the old Section 80C). The money stays locked for the full five years, with no loan against it; the one early withdrawal allowed is by a nominee after the holder's death. The interest is taxable. Read more in what a tax-saving fixed deposit is.

An ordinary FD gives no tax deduction.

What other ways are there to save in a child's name?

There are several, and each has its own rules. Sukanya Samriddhi is opened by a guardian for a girl who has not turned 10, and it matures 21 years after opening (calculator). It is the only national savings scheme limited by the child's sex. You can open one Public Provident Fund (PPF) account for each child (PPF calculator). What you put into your own account and your children's together cannot pass ₹1.5 lakh a year. A guardian can open a post office recurring deposit, time deposit, Monthly Income Scheme, National Savings Certificate or Kisan Vikas Patra in a child's name. From age 10, a child can hold some of these. Details are in post office schemes for a boy child, post office savings schemes and NSC and KVP. A guardian can invest in a minor's name on Koshex; the guardian uses the app and makes the decisions. See mutual funds, the pros and cons of a minor's folio and funds for a child's education. This list does not pick one for your child.