What Is a Fixed Deposit?
A fixed deposit (FD) lets you put a lump sum with a bank or NBFC for a fixed period at a fixed interest rate. Your rate is locked on the day you invest, so market ups and downs do not affect it.
FDs suit money you need safe and predictable: an emergency fund top-up, a goal one to three years away, or regular income for retirees. Bank deposits are insured by DICGC up to ₹5 lakh per depositor per bank, including interest.
How to Use This FD Calculator
- Deposit amount: the lump sum you want to invest.
- Interest rate: the yearly rate your bank offers for your tenure.
- Tenure: how many months you will keep the deposit.
The calculator shows the interest you earn and your maturity value for a cumulative FD, where interest is added back and compounded every quarter. The year-by-year table above shows how it grows.
FD Calculation Formula
- A = Maturity value
- P = Deposit amount
- r = Yearly interest rate (as a decimal)
- t = Tenure in years
Example: ₹1,00,000 at 7% for 1 year
- Interest is added every quarter at 1.75%
- Maturity value = ₹1,07,186
- Effective yearly yield = 7.19%, a little above the stated 7%
How Tenure Changes Your Maturity Value
₹1,00,000 invested at 7%:
| Tenure | Maturity value | Interest 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 |
At 7%, your money roughly doubles in 10 years.
How the Interest Rate Changes Your Result
₹1,00,000 for 5 years at different rates:
| Interest rate | Maturity value |
|---|---|
| 6% | ₹1,34,686 |
| 6.5% | ₹1,38,042 |
| 7% | ₹1,41,478 |
| 7.5% | ₹1,44,995 |
| 8% | ₹1,48,595 |
Just 1% more interest adds about ₹7,100 on every ₹1 lakh over 5 years. It pays to compare banks before you invest.
Senior Citizen FD Rates
Most banks pay senior citizens (60 and above) an extra 0.25% to 0.50% on FDs.
Example: ₹5,00,000 for 5 years
- At the regular 7%: ₹7,07,389
- At the senior rate of 7.5%: ₹7,24,974
- Extra earned: about ₹17,600
Tax on FD Interest
- Taxed at your slab rate: FD interest is added to your income every year, even in a cumulative FD where you receive it only at maturity.
- TDS: banks deduct 10% TDS when your FD interest from that bank crosses ₹50,000 in a financial year (₹1 lakh for senior citizens). Without a PAN, TDS is 20%.
- Form 15G / 15H: if your total income is below the taxable limit, submit Form 15G (or 15H if you are a senior citizen) to stop TDS.
- Tax-saver FD: a 5-year tax-saving FD qualifies for a deduction (popularly known as Section 80C) only under the old regime.
Tax rules change with budgets. Check the current thresholds before you file.
Tips for FD Investors
Split money across 1, 2 and 3-year FDs so some matures every year.
Spread large amounts across banks to stay fully covered by DICGC insurance.
They often pay higher rates and are covered by the same DICGC insurance.
Cumulative grows faster. Monthly or quarterly payout gives regular income.
Premature withdrawal usually carries a 0.5–1% penalty on the rate.
After tax, compare your FD return with your personal inflation rate.
Frequently Asked Questions
How is FD interest calculated?
Most Indian banks compound FD interest every quarter. The formula is A = P × (1 + r/4)^(4t). For short tenures, usually under six months, many banks pay simple interest instead.
Is FD interest taxable?
Yes. FD interest is added to your income and taxed at your slab rate every year, whether you receive it as payouts or at maturity.
What is the TDS limit on FD interest?
Banks deduct 10% TDS when interest from one bank crosses ₹50,000 in a financial year, or ₹1 lakh for senior citizens. Without a PAN, the rate is 20%. Check current rules as thresholds can change.
Can I break my FD before maturity?
Yes, most FDs allow premature withdrawal, but banks usually reduce the interest rate by 0.5–1% as a penalty. Tax-saving FDs cannot be broken before 5 years.
What is the difference between cumulative and non-cumulative FD?
In a cumulative FD, interest is added back and compounded, so you get a larger amount at maturity. In a non-cumulative FD, interest is paid out monthly, quarterly or yearly.
Are FDs safe?
Bank FDs are among the safest options. Deposits are insured by DICGC up to ₹5 lakh per depositor per bank. Corporate and NBFC FDs are not covered by this insurance, so check their credit ratings.
