Fixed Deposit (FD) Calculator

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₹5,000 ₹25 L
% p.a.
1% 15%
1 Yr 25 Yrs
Estimated Maturity Value
₹0
Principal Amount
₹0
Interest Earned
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FD Investment Breakdown

Specification Details

What is a Fixed Deposit (FD)?

A **Fixed Deposit (FD)** is a low-risk financial instrument offered by banks and non-banking financial companies (NBFCs) in India. FDs allow individuals to deposit a lump-sum amount of money for a predetermined period (tenure ranging from 7 days to 10 years) at a guaranteed rate of interest that is higher than standard savings account rates.

Fixed Deposits are highly popular because they offer capital safety, predictable returns, and flexible options for interest payouts (monthly, quarterly, or on maturity). The interest rate is locked once the deposit is booked, protecting the investor from market interest rate cuts.

How Fixed Deposits Compounded: The Math Formula

The maturity value of a compound interest Fixed Deposit is calculated using the following mathematical formula:

A = P × (1 + r / f)f × n

Where:

  • A is the total Maturity Amount payable at the end of the tenure.
  • P is the Principal Deposit Amount invested upfront.
  • r is the annual nominal interest rate (written as a decimal, e.g. 7.1% = 0.071).
  • f is the compounding frequency per year (monthly = 12, quarterly = 4, half-yearly = 2, yearly = 1).
  • n is the total investment tenure calculated in years.

Compounding Frequency Differences: Real-world Example

Most commercial banks in India (such as SBI, HDFC, and ICICI) use **Quarterly Compounding** as their standard policy. Compounding frequency significantly impacts final returns. Let's see how: You invest **₹1,00,000** for **5 years** at an interest rate of **7.1% per annum**.

1. Quarterly Compounding (Indian Standard)

Interest compounds 4 times a year. Formula inputs: P = 1,00,000, r = 0.071, f = 4, n = 5.

A = 1,00,000 × (1 + 0.071 / 4)4 × 5 = 1,00,000 × (1.01775)20

Maturity Value: **₹1,42,207** → Interest Earned: **₹42,207**

2. Annual Compounding

Interest compounds once a year. Formula inputs: P = 1,00,000, r = 0.071, f = 1, n = 5.

A = 1,00,000 × (1 + 0.071)5 = 1,00,000 × (1.071)5

Maturity Value: **₹1,40,904** → Interest Earned: **₹40,904**

Quarterly compounding earns you an additional **₹1,303** over the tenure compared to annual compounding, due to interest earning interest more frequently.

Tax Implications on Fixed Deposits (TDS)

FD interest is not entirely tax-free. Here are key tax rules to keep in mind:

  • Taxable Income: Interest earned on FDs is fully taxable and must be declared under "Income from Other Sources" on your annual Income Tax Return (ITR). It is taxed at your regular income tax slab rate.
  • Tax Deducted at Source (TDS): Banks deduct TDS at **10%** if the total interest earned across all branches of a bank exceeds **₹40,000** in a financial year (limit is raised to **₹50,000** for senior citizens).
  • Form 15G / 15H: If your total annual taxable income is below the taxable threshold, you can submit Form 15G (Form 15H for senior citizens) to prevent the bank from deducting TDS.
  • Tax Saving FDs: FDs with a lock-in period of 5 years qualify for tax deductions under **Section 80C** up to ₹1.5 Lakhs per year. However, the interest earned remains taxable.

Frequently Asked Questions (FAQs)

Yes, most banks allow premature withdrawal of FDs. However, they typically charge a penalty of 0.5% to 1.0% on the applicable interest rate for the period the deposit remained with the bank. Tax-saving 5-year FDs cannot be prematurely withdrawn under any circumstances.
Yes. Almost all Indian banks offer a premium interest rate for senior citizens (aged 60 and above), typically 0.50% to 0.75% higher than the rate offered to general depositors.
Fixed Deposits are highly secure. Under the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, each depositor is insured up to a maximum of ₹5,000,000 (5 Lakhs) for both principal and interest amounts per bank.
In a cumulative FD, interest compounds and is paid out only at maturity, maximizing capital growth. In a non-cumulative FD, interest is paid out at regular intervals (monthly, quarterly, or half-yearly), providing a steady stream of income.
If you have a lump sum amount to invest immediately, choose a Fixed Deposit (FD) to maximize interest. If you want to build savings gradually through monthly contributions, choose a Recurring Deposit (RD).