FD Calculator Guide: How Fixed Deposit Interest Is Calculated

Fixed Deposits remain India's most trusted savings instrument — safe, predictable, and simple. But most people don't actually know how the bank arrives at the maturity amount they're promised. This guide shows the exact formula and the details that affect your real returns.

The FD Maturity Formula

Most bank FDs compound quarterly. The formula:

A = P × (1 + r/n)^(n×t)

A = Maturity amount, P = Principal, r = annual interest rate, n = compounding frequency per year (usually 4 for quarterly), t = years

Worked Example

Deposit: ₹1,00,000 | Rate: 7% p.a. | Tenure: 5 years | Compounded quarterly

  • A = 1,00,000 × (1 + 0.07/4)^(4×5)
  • A = 1,00,000 × (1.0175)^20
  • A = 1,00,000 × 1.4148
  • A = ₹1,41,478
  • Interest earned: ₹41,478

Cumulative vs Non-Cumulative FD

TypeHow Interest Is PaidBest For
CumulativeReinvested, paid as lump sum at maturityWealth building, no need for regular income
Non-CumulativePaid out monthly/quarterly/annuallyRetirees needing regular income

Cumulative FDs earn slightly more overall due to compounding on the reinvested interest, while non-cumulative FDs give you cash flow along the way but no compounding benefit.

FD Returns by Tenure (₹1,00,000 @ 7% Cumulative)

TenureMaturity ValueInterest Earned
1 year₹1,07,186₹7,186
3 years₹1,23,144₹23,144
5 years₹1,41,478₹41,478
10 years₹2,00,160₹1,00,160

TDS on FD Interest: What You Need to Know

  • Banks deduct 10% TDS if your total FD interest across all deposits with that bank exceeds ₹40,000/year (₹50,000 for senior citizens)
  • If you don't have taxable income, submit Form 15G (below 60) or Form 15H (60+) to avoid TDS deduction
  • TDS is not the final tax — your FD interest is added to your total income and taxed at your slab rate; TDS is just an advance deduction, adjustable at filing time

FD vs Other Safe Investment Options

InstrumentTypical ReturnLock-inTax Benefit
Regular FD6.5–7.5%Flexible (7 days to 10 yrs)None (unless tax-saver FD)
Tax-Saver FD6.5–7.5%5 years mandatorySection 80C up to ₹1.5L
PPF~7–7.5%15 yearsFully tax-free (EEE)
RD6.5–7.5%Flexible, monthly depositsNone

Regular FD interest is fully taxable at your slab rate, while PPF is completely tax-free — an important difference when comparing "returns" on paper.

Frequently Asked Questions

Q: Can I break an FD before maturity?Yes, but banks usually charge a penalty of 0.5-1% on the applicable interest rate for premature withdrawal.
Q: Do senior citizens get better FD rates?Yes, typically 0.25-0.75% higher than regular rates at most banks.
Q: Is FD interest compounded monthly, quarterly, or annually?Most Indian bank FDs compound quarterly by default, though this can vary by bank — always check the specific scheme's terms.
Q: Are small finance banks' higher FD rates safe?Deposits up to ₹5 lakh per bank are insured by DICGC regardless of bank type, but always verify the bank's credibility for amounts above this.

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