FD calculator

How FD interest is compounded

Almost every Indian bank compounds fixed-deposit interest quarterly, even when the quoted rate is an annual figure. That means the effective return you actually earn is slightly higher than the headline rate — this calculator uses that quarterly-compounding formula, not simple annual interest:

where P is the deposit, r is the quoted annual rate, and n is the tenure in years. The "effective annual yield" shown above is the single annual rate that would produce the same maturity value — always a touch higher than the quoted rate, because of the quarterly compounding.

What affects FD returns

• Tenure. Longer isn't always better — banks often price mid-length tenures (1–3 years) higher than very short or very long ones.
• Cumulative vs non-cumulative. A cumulative FD reinvests interest and pays it all at maturity (what this calculator assumes); a non-cumulative FD pays interest out periodically instead, so it doesn't compound the same way.
• Senior citizen rates. Most banks add roughly 0.25–0.5 percentage points for depositors above 60.
• Tax. FD interest is fully taxable at your income-tax slab rate, and TDS applies once interest crosses the threshold in a year — factor that into what you actually keep.

Frequently asked questions

Why is the maturity value slightly higher than simple annual interest would suggest?

Because Indian banks compound FD interest quarterly, not annually — each quarter's interest gets added to the principal before the next quarter's interest is calculated, so you effectively earn interest on interest four times a year rather than once.

Is FD interest taxable?

Yes — fully, at your income-tax slab rate, unlike some tax-advantaged instruments. Banks deduct TDS once your total interest from that bank crosses the annual threshold, but you still owe tax on the full interest earned regardless of whether TDS was deducted.

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