How is fixed deposit interest calculated?

For reinvestment (cumulative) deposits, banks use compound interest: A = P(1 + r/n)^(nt), where n is the compounding frequency. For non-cumulative deposits, interest is paid out periodically and not compounded. Check your bank's product terms for the specific compounding frequency used.

Is fixed deposit interest taxable?

Yes, in most countries. Interest earned on fixed deposits is typically taxed as regular income at your applicable tax rate. Tax rules vary by country - some may withhold tax at source, others require you to declare it in your annual return. Consult your local tax authority for specifics.

FD Calculator

Q: What is a Fixed Deposit (FD)?

A Fixed Deposit is a savings instrument offered by banks and NBFCs where you deposit a lump sum for a fixed period at a predetermined interest rate. The rate does not change during the FD tenure, regardless of market conditions. At maturity, you receive the principal plus accumulated interest.

Q: What is the difference between cumulative and non-cumulative FD?

A cumulative FD reinvests the interest back into the deposit, so interest compounds over the tenure and the full amount (principal + compound interest) is paid at maturity. A non-cumulative FD pays interest at regular intervals (monthly, quarterly, etc.) without compounding. Cumulative FDs produce a higher total return.

Q: Is FD interest taxable?

Yes. FD interest is added to your income and taxed at your applicable slab rate. If annual FD interest from one bank exceeds ₹40,000 (₹50,000 for senior citizens), the bank deducts TDS at 10%. Submit Form 15G (or Form 15H for senior citizens) to avoid TDS when your total income is below the taxable limit.

Calculate your FD maturity amount and interest for any compounding frequency.

🏦 What is a Fixed Deposit?

A Fixed Deposit (FD) is one of India's most popular and trusted savings instruments. It is a financial product offered by banks, small finance banks, and NBFCs (Non-Banking Financial Companies) where you deposit a lump sum amount for a predetermined period at a guaranteed interest rate. Unlike a savings account where the interest rate can change, the FD interest rate is locked in at the time of booking and does not change for the entire tenure, regardless of market conditions.

FDs are considered one of the safest investment options in India. Bank FDs up to ₹5 lakh are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India. This means even if a bank fails, deposits up to ₹5 lakh per depositor per bank are protected. This insurance, combined with guaranteed returns, makes FDs the go-to choice for risk-averse investors, retirees, and those parking short-term funds.

Indian banks typically compound FD interest quarterly for cumulative (reinvestment) FDs. This means interest is calculated and added to the principal every three months, and the next quarter's interest is computed on this larger balance. Over multi-year tenures, this quarterly compounding produces noticeably higher returns than simple interest. A 7% rate with quarterly compounding has an effective annual yield of (1 + 0.07/4)^4 - 1 = 7.19%.

There are two main types of FDs in terms of interest payout: cumulative FDs where interest is reinvested and paid at maturity (higher total return), and non-cumulative FDs where interest is paid out monthly, quarterly, or annually (useful for retirees needing regular income). This calculator computes the cumulative FD maturity value with compounding at your chosen frequency.

Interest earned on FDs is fully taxable as "Income from Other Sources." If total FD interest across all branches and banks exceeds ₹40,000 per financial year (₹50,000 for senior citizens aged 60 and above), the bank deducts TDS at 10%. If your total income is below the taxable limit, you can submit Form 15G (or 15H for seniors) to request that TDS not be deducted.

📐 FD Maturity Formula

A = P × (1 + r/n)^{n × t}

A = Maturity amount (principal + compound interest)

P = Principal (deposit amount)

r = Annual interest rate as decimal (e.g. 7% = 0.07)

n = Compounding frequency (1=Annual, 2=Half-yearly, 4=Quarterly, 12=Monthly)

t = Tenure in years

Interest Earned = A − P. Effective Annual Rate (EAR) = (1 + r/n)ⁿ − 1. For example, 7% compounded quarterly gives EAR = (1.0175)⁴ − 1 = 7.186%, which is the actual annual growth rate on your deposit.

📖 How to Use This Calculator

Steps to Calculate FD Maturity

Enter the deposit amount - the lump sum you plan to put in the FD.

Enter the interest rate offered by your bank. You can find this on your bank's website or by visiting the branch. Senior citizens should add the additional rate offered.

Set the tenure - FD tenures range from 7 days to 10 years. The slider goes from 3 months (0.25 years) to 10 years. Use 0.25 for 3 months, 0.5 for 6 months, 1 for 1 year, etc.

Select compounding frequency. Use Quarterly for most cumulative bank FDs in India. Use Monthly for RDs or specific products. Use Annual for some NBFC deposits.

Click Calculate FD to see maturity amount, interest earned, effective annual rate, and a pie chart showing the principal vs interest split.

💡 Example Calculations

Example 1 — Standard 1-Year FD

₹5,00,000 at 7% p.a. for 1 year, quarterly compounding

A = 5,00,000 × (1 + 0.07/4)^4×1 = 5,00,000 × (1.0175)⁴

(1.0175)⁴ = 1.07186 → A = 5,00,000 × 1.07186 = ₹5,35,928

Maturity = ₹5,35,928 · Interest = ₹35,928 · Effective Rate = 7.19%

Try this example →

Example 2 — 5-Year FD for Long-term Savings

₹2,00,000 at 7.5% p.a. for 5 years, quarterly compounding

A = 2,00,000 × (1 + 0.075/4)^4×5 = 2,00,000 × (1.01875)²⁰

(1.01875)²⁰ = 1.4503 → A = 2,00,000 × 1.4503

Maturity = ₹2,90,065 · Interest = ₹90,065 · Growth = 45%

Try this example →

❓ Frequently Asked Questions

What is a Fixed Deposit (FD)?+

A Fixed Deposit is a savings product offered by banks and financial institutions where you deposit a lump sum for a fixed period at a guaranteed, predetermined interest rate. Your deposit earns compound interest throughout the tenure. At maturity, you receive the principal plus all accumulated interest. FDs are extremely safe, with deposits up to ₹5 lakh insured by DICGC. Premature withdrawal is allowed but typically incurs a penalty of 0.5-1% reduction in the applicable interest rate.

How is FD interest calculated?+

Most cumulative FDs in India use quarterly compounding: A = P(1 + r/4)^(4t). For a ₹1 lakh FD at 7% for 2 years: A = 1,00,000 × (1.0175)^8 = 1,14,888. Interest = ₹14,888. The effective annual yield is (1.0175)^4 - 1 = 7.186%, slightly higher than the nominal 7%. Non-cumulative FDs that pay interest periodically do not compound; the total interest received equals P × r × t.

What is the difference between cumulative and non-cumulative FD?+

A cumulative FD reinvests interest back into the deposit - interest compounds and the full amount (principal + compound interest) is paid at maturity. Total return is higher. A non-cumulative FD pays interest at regular intervals (monthly, quarterly, half-yearly, or annual payouts) without reinvesting. Total interest earned is lower than cumulative but provides regular cash flow. Retirees and those needing regular income prefer non-cumulative FDs; those building wealth prefer cumulative.

Is FD interest taxable?+

Yes. FD interest is taxable as "Income from Other Sources" at your applicable income tax slab rate. If total FD interest from a bank exceeds ₹40,000 per financial year (₹50,000 for senior citizens), TDS is deducted at 10%. If your total income is below the basic exemption limit (₹3 lakh for everyone, ₹3.5 lakh for senior citizens under old regime), submit Form 15G (15H for seniors) to avoid TDS. You must still declare all FD interest in your ITR.

What is the FD maturity formula?+

A = P(1 + r/n)^(nt), where A is the maturity amount, P is the principal deposit, r is the annual interest rate as a decimal, n is the number of compounding periods per year (4 for quarterly), and t is the time in years. For example, ₹2 lakh at 7.5% for 3 years with quarterly compounding: A = 2,00,000 × (1 + 0.075/4)^(4×3) = 2,00,000 × (1.01875)^12 = 2,50,959.

What is the maturity amount for a ₹1 lakh FD at 7% for 2 years?+

With quarterly compounding (standard for most Indian banks): A = 1,00,000 × (1.0175)^8 = ₹1,14,888. Interest earned = ₹14,888. Senior citizens typically receive 0.25–0.5% higher rates; at 7.5% quarterly for 2 years, interest = ₹16,136. Effective annual yield at 7% quarterly = (1.0175)^4 - 1 = 7.186% - slightly above the nominal rate.

What is the TDS threshold for FD interest and how do I avoid it?+

TDS on FD interest is deducted at 10% when total interest from a single bank exceeds ₹40,000 per year (₹50,000 for senior citizens). To avoid TDS, submit Form 15G (if below 60 years and total income is below the basic exemption limit) or Form 15H (if 60+ years and total income is below the exemption limit) to your bank at the start of each financial year. TDS is deducted automatically if forms are not submitted even if your total income is below the taxable threshold.

Is a fixed deposit better than a SIP?+

FDs offer guaranteed capital protection with fixed returns (typically 6.5–7.5% for major banks; up to 9% for small finance banks). SIPs in equity funds have historically returned 12–15% over 15+ year periods, but with market risk and no capital guarantee. For goals within 1–3 years or for emergency funds, FD is better. For 10+ year wealth creation goals, equity SIPs have historically outperformed FDs significantly. Many advisors recommend combining both in a portfolio.

Can I break an FD before maturity and what is the penalty?+

Yes, most FDs can be closed before maturity with a penalty of 0.5–1% below the applicable rate for the actual holding period. For example, if you held a 3-year FD for 18 months and the 18-month rate is 6.5%, you receive 5.5–6% instead. Tax-saving FDs (5-year lock-in under Section 80C) cannot be prematurely closed under any circumstances. Some banks' sweep-in FDs linked to savings accounts allow penalty-free partial withdrawals.