How FD interest is calculated
Indian banks compound fixed deposit interest quarterly for cumulative FDs. That means every three months the interest is added to your principal, and the next quarter's interest is calculated on the bigger amount. So a 7% FD actually earns about 7.19% effective per year.
A = maturity amount, P = deposit, r = annual rate (as decimal), n = compounding times per year (4 for quarterly), t = years. Example: ₹1,00,000 at 7% for 5 years with quarterly compounding = ₹1,41,478. Interest earned = ₹41,478.
Cumulative vs non-cumulative FD
In a cumulative FD, interest is reinvested and paid at maturity – use this calculator for that. In a non-cumulative FD, you receive interest monthly or quarterly as income (useful for retired people), so there is no compounding on paid-out interest.
Tax on FD interest
- FD interest is fully taxable as per your income-tax slab.
- Banks deduct TDS at 10% if interest crosses the threshold in a year (higher limit for senior citizens). Submit Form 15G/15H if your total income is below the taxable limit.
- 5-year tax-saver FDs give a Section 80C deduction (old regime only) but cannot be broken early.
Smart FD tips
- Senior citizens usually get 0.25–0.75% extra interest.
- Small finance banks offer higher rates; deposits up to ₹5 lakh per bank are insured by DICGC.
- FD laddering – split money into FDs of 1, 2, 3 years so some money matures every year.
- Premature withdrawal usually has a 0.5–1% penalty.
Hinglish mein: FD safe hai, lekin agar inflation 6% hai aur FD 7% de raha hai, to tax ke baad real return bahut kam hota hai. Long-term goals ke liye PPF ya mutual funds bhi compare karein. Rates change often – check your bank's current FD rate before investing.
Frequently asked questions (FAQ)
How is FD maturity calculated?
Using compound interest: A = P(1 + r/n)^(n×t). Most Indian banks use quarterly compounding (n = 4).
What will ₹1 lakh become in 5 years at 7% FD?
With quarterly compounding it becomes about ₹1,41,478, i.e. ₹41,478 interest.
Is FD interest taxable?
Yes, FD interest is added to your income and taxed as per your slab. TDS may be deducted by the bank.
Kya FD beech mein tod sakte hain?
Haan, normal FD premature close ho sakti hai, lekin bank 0.5–1% penalty laga sakta hai. Tax-saver FD 5 saal tak lock rehti hai.
Does this work for post office time deposit?
Post office time deposits also compound quarterly, so you can enter the current post office rate to estimate maturity.