What is a fixed deposit?
A fixed deposit (FD) is a savings product where you lock a sum of money with a bank, small finance bank or NBFC for a fixed period at a fixed interest rate. The rate does not change for the tenure you choose, which makes FDs one of the most predictable ways to grow money in India.
How to use the FD calculator
- Deposit amount: the principal you plan to invest.
- Interest rate: the annual rate offered by your bank for the chosen tenure.
- Tenure: how many years the deposit will run.
- Compounding: how often interest is added to your balance. Most banks compound quarterly.
FD maturity formula
- A = maturity amount
- P = principal deposited
- r = annual interest rate (as a decimal)
- n = compounding periods per year (4 for quarterly)
- t = tenure in years
Worked example
You deposit ₹1,00,000 for 5 years at 7% a year, compounded quarterly. Each quarter earns 1.75%, and there are 20 quarters: ₹1,00,000 × (1.0175)20 ≈ ₹1,41,478. You earn ₹41,478 in interest.
Why compounding frequency matters
₹1,00,000 at 7% for 5 years:
| Compounding | Maturity value | Interest |
|---|---|---|
| Monthly | ₹1,41,763 | ₹41,763 |
| Quarterly | ₹1,41,478 | ₹41,478 |
| Half-yearly | ₹1,41,060 | ₹41,060 |
| Yearly | ₹1,40,255 | ₹40,255 |
More frequent compounding earns slightly more, because interest starts earning interest sooner. Banks often publish an "effective annual yield" that reflects this. Compare frequencies for any amount with the compound interest calculator.
Tips for better FD returns
- Compare rates. Small finance banks often pay 0.5–1.5% more than large banks, and are covered by the same ₹5 lakh DICGC insurance.
- Senior citizens usually get an extra 0.25–0.75% a year.
- Ladder your FDs. Split a large amount across 1-, 2- and 3-year deposits so some money matures every year.
- Short FDs pay simple interest. Deposits under six months usually earn simple interest; check with the simple interest calculator.
- Consider tax. Interest is taxed at your slab rate, so compare post-tax returns with options such as the PPF.
Want to save a fixed amount every month instead of one lumpsum? Use the RD calculator.
Frequently asked questions
How is FD interest calculated?
Most Indian banks use compound interest for fixed deposits of six months or more, usually compounded quarterly. The maturity amount is A = P × (1 + r/n)^(n × t), where P is the deposit, r the annual rate, n the number of compounding periods per year and t the tenure in years.
Is FD interest taxable?
Yes. FD interest is added to your income and taxed at your slab rate. Banks deduct TDS when your interest from that bank crosses the yearly threshold (₹50,000 for most people and ₹1,00,000 for senior citizens). You can submit Form 15G or 15H if your total income is below the taxable limit.
What is the difference between cumulative and non-cumulative FDs?
In a cumulative FD, interest is reinvested and paid with the principal at maturity, so it compounds. In a non-cumulative FD, interest is paid out monthly, quarterly or yearly, so it does not compound. This calculator shows the cumulative maturity value.
Is my money safe in a bank FD?
Deposits in banks are insured by the DICGC up to ₹5 lakh per depositor per bank, covering principal and interest together. Spreading large amounts across banks keeps each within the insured limit.
Can I break an FD before maturity?
Yes, most FDs allow premature withdrawal, but banks usually pay a lower rate (often 0.5–1% less than the applicable rate) for the period the money actually stayed. Tax-saving FDs have a 5-year lock-in and cannot be broken early.
Sources
Last updated 19 September 2026. Results are estimates for planning only and are not investment, tax or legal advice. See our disclaimer.