What is a fixed deposit?
A fixed deposit (FD) is a deposit with a bank, post office or NBFC for a fixed tenure at a fixed interest rate. Unlike a savings account, the rate is locked for the entire term, which is why FDs remain the go-to instrument for capital-safe goals: an emergency fund, a child’s school fees due in two years, or a retiree’s monthly income. Bank deposits are insured by DICGC up to ₹5 lakh per depositor per bank.
How to use the FD calculator
Enter the amount, the annual rate on your deposit receipt and the tenure in years and months. Choose the compounding frequency — quarterly for almost all Indian banks — and the maturity amount, interest earned and effective annual yield appear instantly. The effective yield is what you actually earn per year after compounding; it is always slightly higher than the quoted rate.
FD interest formula
Maturity amount = P × (1 + r ÷ m)^(m × t)
- P = principal
- r = annual rate as a decimal
- m = compounding periods per year (4 = quarterly)
- t = tenure in years
Example: ₹1,00,000 at 7% for 5 years, compounded quarterly: 1,00,000 × (1 + 0.0175)²⁰ ≈ ₹1,41,478. Interest earned ≈ ₹41,478 and the effective annual yield is about 7.19%.
Cumulative vs non-cumulative FDs
In a cumulative FD, interest is reinvested and paid at maturity — this is what the calculator models. In a non-cumulative (payout) FD, interest is paid monthly or quarterly to your account, so there is no compounding; select “Simple interest” to estimate it. Monthly-payout FDs usually pay a slightly discounted rate.
Tax on FD interest
Interest is fully taxable at your slab rate, and the bank deducts TDS at 10% (20% without PAN) once interest crosses the annual threshold (higher for senior citizens). Submit Form 15G/15H if your total income is below the taxable limit. Tax-saver FDs with a 5-year lock-in qualify for a Section 80C deduction under the old regime, but their interest is still taxable.
Getting a better rate
- Senior citizens get 0.25–0.75% extra at most banks.
- Small finance banks often pay 1–2% more than large PSU banks; stay within the ₹5 lakh DICGC limit per bank.
- Ladder your deposits: split a large sum into FDs of 1, 2, 3, 4 and 5 years so money matures regularly and you can reinvest at prevailing rates.
- Avoid premature withdrawal — banks pay the rate for the period actually run, minus a 0.5–1% penalty.
Use the FD calculator to compare a 7% deposit compounded quarterly with a 7.25% deposit paid out yearly before you decide.
Frequently asked questions
How is FD interest calculated?
Maturity amount = P × (1 + r/m)^(m × t), where P is the deposit, r is the annual rate, m is the number of compounding periods per year (4 for quarterly, the default for most Indian banks) and t is the tenure in years.
Is FD interest taxable?
Yes. Interest earned on fixed deposits is added to your income and taxed at your slab rate. Banks deduct TDS when interest exceeds the annual threshold, unless you submit Form 15G/15H.
Which compounding frequency do banks use?
Most Indian banks compound FD interest quarterly. Some post office schemes compound annually. Check your deposit receipt and select the matching option.