Zakat on Fixed Deposits (FDR) and the Interest Ruling

Short answer: (1) Yes — the FDR principal is your wealth; it can be broken even before maturity (with a penalty), so ownership and control are complete — add it yearly to your other cash and pay 2.5%. (2) The fixed-rate profit of a conventional bank is riba — it may not be taken; any accrued must be given away without expecting reward; it is not zakat and cannot offset your zakat. Details: To the worry that 'zakat will eat the savings': zakat is the right attached to growing wealth — do not leave wealth idle; put it into halal trade/investment, as Umar (ra) directed even for orphans' wealth. Islamic-bank mudarabah deposits are structurally different (profit-loss sharing) and may be an alternative subject to verifying genuine shariah compliance; lawful profit from them, if saved, is likewise zakatable. Evidence: Quran 2:275; Sahih Muslim 1598; Quran 9:34-35 and Sahih Muslim 987 (warning on unzakated hoards); the Permanent Committee and Shaykh Ibn Baz on disposing of bank interest. For complex individual cases, consult a qualified scholar.