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FD Calculator
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A fixed deposit (FD) is a term deposit where a lump sum is placed with a bank or non-banking financial company (NBFC) for a predetermined period at a fixed interest rate. The depositor agrees not to withdraw funds before maturity in exchange for a guaranteed interest rate higher than a regular savings account. FDs are one of the safest investment instruments because deposits with scheduled commercial banks are insured up to ₹5 lakh per depositor by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
How FD Interest Is Calculated
Fixed deposit interest is calculated using the compound interest formula: A = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the tenure in years. For simple interest FDs (common for very short tenures), the formula simplifies to A = P(1 + rt).
The compounding frequency significantly affects the maturity amount. Quarterly compounding (4 times per year), which is the standard for most Indian banks, produces a higher effective yield than annual compounding at the same nominal rate. Monthly compounding produces the highest maturity value of all standard frequencies.
FD Interest Rates by Tenure (Representative Range)
| Tenure | Typical Rate (Regular) | Typical Rate (Senior Citizen) |
|---|---|---|
| 7 days to 45 days | 3.00% to 4.50% | 3.50% to 5.00% |
| 46 days to 179 days | 4.50% to 5.75% | 5.00% to 6.25% |
| 180 days to 1 year | 5.75% to 6.50% | 6.25% to 7.00% |
| 1 year to 2 years | 6.50% to 7.25% | 7.00% to 7.75% |
| 2 years to 3 years | 6.75% to 7.00% | 7.25% to 7.50% |
| 3 years to 5 years | 6.50% to 7.00% | 7.00% to 7.50% |
| 5 years to 10 years | 6.25% to 6.75% | 6.75% to 7.25% |
Compounding Frequency and Effective Yield
At a nominal rate of 7% per annum, the effective annual yield varies with compounding frequency. Annual compounding produces exactly 7.00%. Quarterly compounding produces 7.19% (the most common for Indian FDs). Monthly compounding produces 7.23%. The difference between quarterly and monthly compounding is small but becomes meaningful on large principals over long tenures. Most public sector banks in India use quarterly compounding as the default.
Frequently Asked Questions
Yes. FD interest is fully taxable as income from other sources at your applicable income tax slab rate. Banks deduct TDS at 10% when the interest exceeds u20b940,000 in a financial year (u20b950,000 for senior citizens). If your total income is below the taxable limit, submit Form 15G (or Form 15H for senior citizens) to the bank to avoid TDS deduction.
A cumulative FD reinvests the interest earned back into the deposit throughout the tenure. The interest compounds and is paid along with the principal at maturity. A non-cumulative FD pays out interest at regular intervals: monthly, quarterly, half-yearly, or annually. Cumulative FDs generate a higher total return because of compounding. Non-cumulative FDs are preferred by those who need regular income from their deposit.
Premature withdrawal is allowed on most FDs. However, banks typically charge a penalty of 0.5% to 1% on the applicable interest rate. The interest rate applied is the rate applicable for the period the deposit has actually run, minus the penalty. For example, if you booked a 2-year FD at 7% but withdraw after 1 year, the bank will pay at the 1-year rate minus 0.5% to 1%.
Deposits in scheduled commercial banks are insured up to u20b95 lakh per depositor per bank by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India. This limit covers the total of all deposits (savings, current, FD, RD) held by one depositor across all branches of the same bank. Deposits in different banks are insured separately, each up to u20b95 lakh.
Yes. A tax-saving FD has a mandatory lock-in period of 5 years and qualifies for Section 80C deduction up to u20b91.5 lakh per financial year. Premature withdrawal and loans against tax-saving FDs are not permitted. The interest earned on tax-saving FDs is still taxable at the applicable slab rate, unlike PPF interest which is tax-free. Regular FDs have no lock-in beyond the chosen tenure.