A Fixed Deposit (FD) is a lump-sum investment locked with a bank or NBFC for a fixed period at a fixed interest rate. Indian banks compound FD interest quarterly by default. The FD calculator shows the maturity amount and the interest you will earn over the chosen tenure.
What is Fixed Deposit?
An FD is one of the simplest savings products in India. You hand the bank a lump sum, choose a tenure (anywhere from 7 days to 10 years), and the bank promises to return the principal plus a pre-agreed interest rate at maturity. Unlike a savings account, you cannot withdraw the money during the tenure without breaking the deposit (and paying a small penalty).
Most Indian banks compound FD interest quarterly — meaning interest is calculated and added to the principal every three months, and the next quarter's interest is calculated on the new, slightly larger total. A few banks compound monthly. Some smaller cooperative banks compound annually. The compounding frequency makes a small but real difference to the final amount.
FDs are considered safe — bank deposits up to ₹5 lakh per depositor per bank are insured by DICGC, a subsidiary of the RBI. The flip side is that returns are modest (currently 6.5%–7.5% for general citizens, 7%–8% for senior citizens) and fully taxable at your income tax slab rate. For wealth creation over long periods, FDs lose to inflation more often than not. They are best used as an emergency reserve or for short-term goals.
How FD interest is calculated
FD interest in India follows the standard compound interest formula. The default compounding interval is quarterly across most public-sector and major private banks. Interest accrues on the principal until the first compounding date, then on principal + accrued interest, and so on until maturity.
- A
- Maturity amount—what the bank pays you at the end
- P
- Principal—the deposit amount
- r
- Annual interest rate—as a decimal — 7.5% = 0.075
- n
- Compounding frequency—4 for quarterly (Indian default), 12 for monthly, 1 for annual
- t
- Tenure—duration in years
How to use this calculator
Adjust any input above to update the maturity amount instantly. Use this calculator before locking funds — small changes in rate or tenure produce noticeable differences in the maturity amount.
Enter the deposit amount
The lump sum you want to deposit. Most banks have a minimum of ₹1,000 (some cooperative banks accept ₹100). There is no upper limit — but FDs above ₹5 lakh per bank are not covered by DICGC insurance, so consider splitting large amounts across banks.
Enter the interest rate
Use the rate quoted by your bank for the chosen tenure. Rates differ by bank and tenure — the highest rates are usually offered for 1–3 year FDs, not the longest ones. Senior citizens (60+) get 0.5%–0.75% extra. Small finance banks often offer 0.5%–1.5% above big-bank rates.
Set the tenure
Pick how long you can lock in the money. Common tenures are 6 months, 1 year, 2 years, 3 years, 5 years (tax-saver), and 10 years. Tax-saver FDs (5-year lock-in) qualify for ₹1.5 lakh deduction under Section 80C but cannot be broken.
Choose the compounding frequency
Quarterly is the Indian banking default — pick that unless your bank's brochure says otherwise. Monthly compounding is rare but slightly better. Annual compounding gives the lowest maturity at the same rate.
Read the maturity and interest
The calculator shows the maturity amount on top, then the pure interest earned, then your principal. Use the interest figure to estimate TDS — banks deduct 10% TDS on interest above ₹40,000 per year (₹50,000 for seniors).
When an FD makes sense
Emergency fund parking
Keep 3–6 months of expenses in a 6-month FD with auto-renewal. Better returns than a savings account, instantly liquidatable if needed (with a small penalty).
Senior citizen monthly income
A non-cumulative FD pays out interest monthly or quarterly. Combined with the senior citizen rate boost, an FD ladder can produce reliable monthly income.
Tax-saving under 80C
5-year tax-saver FDs qualify for the ₹1.5 lakh 80C deduction. Lock-in is strict — cannot be broken before 5 years. PPF or ELSS usually beat it on tax-adjusted returns, but FDs are simpler.
Short-term goal funding
Saving for a wedding, vehicle, or down payment within 1–3 years? An FD locks in today's interest rate so the goal amount is predictable. Equity is too volatile for short timelines.
Parking maturity proceeds
Got a lump sum from another investment? Park it in an FD while you decide where to deploy it long-term. Better than letting it sit in a savings account.
Loan collateral
Banks offer overdrafts and loans against FDs at the FD rate plus 1–2%. You keep earning the FD interest while accessing liquidity.
Common mistakes to avoid
Treating FD return as the headline rate, ignoring tax
A 7.5% FD at the 30% tax slab returns just 5.25% post-tax. Always think in post-tax terms when comparing investments.
Putting all FDs in one bank
DICGC insurance caps coverage at ₹5 lakh per depositor per bank. Split large amounts across 2–3 banks for full protection.
Choosing the longest tenure assuming higher rates
FD rate curves often peak at 1–3 years, not at 5 or 10 years. Always check the bank's full rate card.
Not nominating a beneficiary
Without nomination, recovering an FD after the depositor's death involves court proceedings. Add a nominee at FD opening — it takes 30 seconds.
Forgetting to file Form 15G/15H if income is below threshold
If your total taxable income is below ₹2.5 lakh (₹3 lakh for seniors, ₹5 lakh for super seniors), submit Form 15G (15H for 60+) at the bank to avoid 10% TDS deduction.
Glossary
- Cumulative FD
- Interest is reinvested every quarter and paid out as a lump sum at maturity. Higher final amount due to compounding. The default if you do not choose otherwise.
- Non-cumulative FD
- Interest is paid out periodically (monthly, quarterly, half-yearly, or annually) instead of reinvested. Lower final amount but provides regular income.
- TDS (Tax Deducted at Source)
- Banks automatically deduct 10% of interest as tax once total interest from that bank crosses ₹40,000 in a financial year (₹50,000 for senior citizens).
- DICGC insurance
- Deposit Insurance and Credit Guarantee Corporation — RBI subsidiary that insures bank deposits up to ₹5 lakh per depositor per bank.
- Tax-saver FD
- 5-year FD that qualifies for ₹1.5 lakh deduction under Section 80C. Cannot be broken before 5 years. No premature withdrawal allowed.
- Sweep-in FD
- Linked to a savings account — excess money above a threshold is auto-converted to an FD, and reverses to savings if the balance falls below another threshold. Best of both worlds.
- Form 15G / 15H
- Self-declarations stating that your total income is below the taxable limit, allowing the bank to skip TDS deduction. 15H is for senior citizens (60+).
- Auto-renewal
- An option where your FD automatically rolls over for the same tenure at the prevailing rate when it matures. Convenient but check the new rate.
Frequently asked questions
How is FD interest calculated?
Is FD interest taxable?
References
- RBI Master Direction on Interest Rate on Deposits— Reserve Bank of India
- DICGC — Deposit Insurance Coverage— Deposit Insurance and Credit Guarantee Corporation
- Income Tax Act — Section 194A (TDS on interest)— Income Tax Department