Minimum ₹1,000. Most banks accept up to any amount.
Check your bank's current FD rate. Rates change frequently.
What is a Fixed Deposit and How is Interest Calculated?
A Fixed Deposit (FD) is a savings instrument where you deposit a lump sum with a bank for a fixed tenure at a predetermined interest rate. Unlike a savings account, the rate is locked at the time of deposit.
Interest can be paid out periodically (monthly, quarterly) or accumulated and paid at maturity (cumulative FD). Cumulative FDs always give higher maturity amounts because interest is compounded.
TDS on FD: If your total FD interest from one bank exceeds ₹40,000 in a financial year (₹50,000 for senior citizens), the bank deducts 10% TDS. Submit Form 15G/15H if your income is below the taxable limit to avoid TDS deduction.
FD Maturity Formula
Where: A = Maturity amount, P = Principal, r = Annual interest rate (decimal), n = Compounding frequency per year, t = Tenure in years.
Compounding frequency matters
For ₹1 lakh at 6.5% for 2 years: Monthly compounding gives ₹1,13,883. Quarterly gives ₹1,13,825. Annual gives ₹1,13,423. The difference is small but grows significantly with larger amounts and longer tenures.
Cumulative vs Non-cumulative
Cumulative FD: Interest compounds and is paid at maturity — best for wealth building. Non-cumulative FD: Interest paid monthly or quarterly — best for regular income needs.
Example Calculation
Frequently Asked Questions
FD interest is calculated using compound interest: A = P × (1 + r/n)^(n×t). For a ₹1 lakh FD at 6.5% for 2 years with quarterly compounding, maturity amount is ₹1,13,825. The compounding frequency (monthly, quarterly, annual) affects the final amount — more frequent compounding gives slightly higher returns.
Yes — FD interest is fully taxable as 'Income from Other Sources' at your applicable slab rate. If total FD interest from one bank exceeds ₹40,000 in a year (₹50,000 for senior citizens), the bank deducts 10% TDS. Submit Form 15G (or 15H for seniors) at the start of each financial year to avoid TDS if your total income is below the taxable limit.
It depends on your goal. FD: guaranteed returns, flexible tenure, fully taxable. PPF: slightly lower rate (7.1%) but completely tax-free — better for long-term (15+ years). SIP: market-linked, no guarantee but historically 10–12% returns over 10+ years. For short-term goals (1–3 years) FD is ideal. For long-term wealth, PPF and SIP typically outperform FD on post-tax returns.
Cumulative FD: Interest is compounded and paid at maturity along with principal — higher total payout, best for wealth building. Non-cumulative FD: Interest paid out monthly, quarterly, or annually — lower total payout but provides regular income. Choose cumulative if you don't need regular income from the FD.
Yes, but most banks charge a penalty of 0.5–1% on premature withdrawal, reducing your effective interest rate. Some banks offer no-penalty FDs. Liquid funds or short-term debt funds are better alternatives if you might need the money before maturity.
Related Calculators
Disclaimer: Results are for informational and educational purposes only — not financial, tax, or legal advice. Tax slabs, rates (EPF, PPF, home loan), and rules shown are based on data available in 2025 and may change. Always verify with a qualified professional or official government sources before making financial decisions.