Fixed Deposit (FD) is one of the safest ways to save money in India. You deposit a lump sum for a fixed period, and at maturity, you receive the amount plus interest. Since FDs offer guaranteed returns, they are ideal for risk-free investing. To know your exact returns, you must understand how to calculate FD interest. In this guide, we explain the FD calculation formula, show examples, and why using an FD Calculator online makes it simple.
Overview of FD Calculation
| Factor | Details |
|---|---|
| Investment Type | Lump sum deposited with bank/NBFC |
| Tenure | 7 days to 10 years |
| Interest Rate | Bank/NBFC decides (usually 3%–8% p.a.) |
| Calculation Types | Simple Interest, Compound Interest |
| Payout Options | Cumulative (paid at maturity) or Non-Cumulative (monthly/quarterly/annual) |
FD Calculation Formula
FD interest is calculated in two ways: Simple Interest and Compound Interest.
1. Simple Interest FD
SI = (P × R × T) ÷ 100
Maturity Amount = P + SI
- P = Principal (amount deposited)
- R = Rate of interest (per annum)
- T = Tenure (in years)
2. Compound Interest FD
A = P × (1 + r/n)n×t
Interest Earned = A − P
- A = Maturity Amount
- P = Principal
- r = Annual interest rate (in decimal)
- n = Number of times interest is compounded per year (quarterly, half-yearly, annually)
- t = Time in years
Examples of FD Calculation
Case 1: Simple Interest FD
Principal = ₹1,00,000
Rate = 6% p.a.
Tenure = 3 years
SI = (1,00,000 × 6 × 3) ÷ 100 = ₹18,000
Maturity Amount = ₹1,18,000
Case 2: Compound Interest FD (Annual Compounding)
Principal = ₹1,00,000
Rate = 6% p.a.
Tenure = 3 years
A = 1,00,000 × (1 + 0.06/1)1×3 = ₹1,19,101
Interest Earned = ₹19,101
Case 3: Compound Interest FD (Quarterly Compounding)
Principal = ₹1,00,000
Rate = 6% p.a.
Tenure = 3 years
A = 1,00,000 × (1 + 0.06/4)4×3 = ₹1,19,267
Interest Earned = ₹19,267
FD Calculation Table (for ₹1,00,000 at 6% p.a.)
| Tenure | Simple Interest – Maturity | Compound Interest (Annual) | Compound Interest (Quarterly) |
|---|---|---|---|
| 1 Year | ₹1,06,000 | ₹1,06,000 | ₹1,06,136 |
| 3 Years | ₹1,18,000 | ₹1,19,101 | ₹1,19,267 |
| 5 Years | ₹1,30,000 | ₹1,33,823 | ₹1,34,897 |
Cumulative vs Non-Cumulative FDs
- Cumulative FD: Interest is compounded and paid at maturity along with principal. Suitable for long-term wealth creation.
- Non-Cumulative FD: Interest is paid out monthly, quarterly, half-yearly, or annually. Suitable for those who want regular income.
Why Use an FD Calculator?
Manually calculating FD returns, especially with compounding, can be confusing. An FD Calculator Tool helps by:
- Showing maturity amount instantly
- Handling different compounding frequencies (quarterly, annual, etc.)
- Comparing FD offers across banks
- Saving time and avoiding errors
Try our Free FD Calculator Tool to calculate FD returns instantly.
Key Points to Remember while calculating FD
- FD interest rates vary between banks and tenures – check before investing.
- Senior citizens usually get 0.25%–0.75% higher interest rates.
- Premature withdrawal may reduce returns due to penalties.
- FD interest above ₹40,000 (₹50,000 for senior citizens) in a year is subject to TDS.
FAQs on FD Calculation
Q1. How do I calculate FD maturity?
Use the formula for simple or compound interest depending on FD type. Since most FDs are compounded, an online FD calculator is the easiest way to know your maturity value.
Q2. Which is better – simple or compound FD?
Compound FDs give higher returns because interest is reinvested periodically. Simple interest FDs are rare and usually for very short tenures.
Q3. How often is FD interest compounded?
It depends on the bank. Most banks compound quarterly, but some may offer half-yearly or annual compounding. The frequency affects your maturity value.
Q4. Is FD interest taxable?
Yes, FD interest is fully taxable as “Income from Other Sources.” Banks also deduct TDS if interest crosses the annual limit.
Q5. Can I get monthly income from FD?
Yes, by choosing a non-cumulative FD. The bank will pay interest monthly, quarterly, or annually instead of adding it to maturity.
Q6. How do senior citizen FDs work?
Senior citizens usually get higher FD rates, often 0.25%–0.75% above regular rates. This helps them earn better returns and regular income post-retirement.
Fixed Deposits are safe and reliable investments for those who want guaranteed returns. By learning how to calculate FD interest using simple and compound formulas, you can estimate maturity amounts accurately. For quick and error-free results, always use an FD Calculator online to compare options and make the best investment decision.
Q7. Does FD tenure affect interest rates?
Yes. Longer FD tenures usually offer higher interest rates, but rates vary from bank to bank and can change over time.
Q8. Can I withdraw an FD before maturity?
Yes, premature withdrawal is allowed, but banks charge a penalty and may pay interest at a lower rate than originally agreed.
Q9. What happens to FD if the depositor passes away?
The FD amount is paid to the nominee or legal heir along with applicable interest, as per bank rules.
Q10. Is TDS deducted on FD maturity or yearly?
TDS is deducted every year on interest earned, not only at maturity, even if the FD is cumulative.
Q11. Is FD safer than other investments?
FDs are considered low-risk because returns are guaranteed. Bank FDs are also insured up to ₹5 lakh per depositor under DICGC.
Great content around the FD…Can you also suggest some FD calculator where I can calculate accoding to my requirements??