Calculate the maturity value and interest earned on a Fixed Deposit (FD), compounded quarterly.
Quarterly compounding (example)
A Fixed Deposit (FD) is a savings instrument offered by banks and NBFCs where you deposit a lump sum for a fixed tenure at a pre-agreed interest rate. Unlike a savings account, the rate does not change during the tenure — you know exactly what you will earn from day one.
FDs in India are considered one of the safest investments because deposits up to ₹5 lakh per bank are insured by DICGC (Deposit Insurance and Credit Guarantee Corporation), a subsidiary of RBI. This makes them a go-to choice for conservative investors, retirees, and anyone who cannot afford to risk their capital.
Interest on bank FDs is compounded quarterly in India. NBFCs may compound monthly or quarterly — always check the scheme document before investing.
Indian bank FDs use quarterly compounding. The formula is:
A = P × (1 + r/4)4t — where A = maturity amount, P = principal, r = annual interest rate (decimal), t = tenure in years.
Example: ₹1,00,000 deposited at 7% p.a. (example rate) for 1 year with quarterly compounding: A = 1,00,000 × (1 + 0.07/4)4 = ₹1,07,186. Total interest earned = ₹7,186. The effective yield is slightly higher than 7% because of quarterly compounding.
For longer tenures, compounding makes a significant difference. The same ₹1,00,000 at 7% for 5 years grows to approximately ₹1,41,478 — earning ₹41,478 in interest without a single additional deposit.
FD rates in India vary by bank type, tenure, and depositor category. As of 2025-26, major public sector banks offer rates between 6.5% and 7.25% p.a. for general citizens. Senior citizens get an additional 0.25% to 0.50% over the standard rate — a meaningful advantage on large deposits.
Small finance banks (SFBs) like Unity Small Finance Bank, Suryoday, and Utkarsh typically offer higher rates — often 8% to 9% p.a. — to attract deposits. These are also DICGC-insured up to ₹5 lakh, but carry slightly higher risk than scheduled commercial banks.
Tax treatment is important. FD interest is added to your taxable income and taxed at your applicable slab rate. If total FD interest in a financial year exceeds ₹40,000 (₹50,000 for senior citizens), the bank deducts TDS at 10%. You can avoid TDS by submitting Form 15G (below 60 years) or Form 15H (senior citizens) if your total income is below the taxable limit.
Tax-saving FDs have a 5-year lock-in and qualify for deduction under Section 80C up to ₹1.5 lakh per year. However, the interest earned on these is fully taxable.
FD rates in India vary by bank and tenure. As of 2025-26, major public sector banks (SBI, PNB, Bank of Baroda) offer 6.5% to 7.25% p.a. for general citizens. Private banks like HDFC, ICICI, and Axis Bank offer similar ranges. Small finance banks offer higher rates — 8% to 9% p.a. — but check DICGC coverage limits. Senior citizens get an additional 0.25% to 0.50% over the standard rate. Always check your bank's current rate sheet before booking, as rates change with RBI policy.
Yes, FD interest is fully taxable in India. It is added to your total income and taxed at your applicable slab rate — 5%, 20%, or 30%. If interest in a financial year exceeds ₹40,000 (₹50,000 for senior citizens), the bank deducts TDS at 10%. If your total income is below the taxable limit, submit Form 15G (general) or Form 15H (senior citizens) to prevent TDS deduction. Tax-saving FDs under Section 80C reduce taxable income but the interest earned on them is still taxable.
DICGC (a subsidiary of RBI) insures bank deposits up to ₹5 lakh per depositor per bank — covering both principal and interest combined. If you have multiple FDs in the same bank, the total insurance is still ₹5 lakh, not ₹5 lakh per FD. To protect larger amounts, split deposits across different banks. This limit applies to scheduled commercial banks and small finance banks — not NBFCs, which are not covered by DICGC.
Yes, most banks allow premature withdrawal of FDs, but with a penalty — typically 0.5% to 1% reduction on the applicable rate. For example, if your 1-year FD rate is 7% and you break it at 6 months, you may earn only 5.5% to 6% instead of the 6-month rate. Some banks offer 'no-penalty premature withdrawal' FDs at slightly lower rates. Tax-saving FDs (5-year lock-in) cannot be broken before maturity under any circumstances.
In a cumulative FD, interest is compounded and paid at maturity along with the principal. This is better for wealth building — you earn interest on interest. In a non-cumulative FD, interest is paid out periodically — monthly, quarterly, or annually — directly to your account. This suits retirees or anyone who needs regular income. The maturity amount of a cumulative FD is higher than the total interest payouts of a non-cumulative FD over the same period, because of compounding.
FDs offer guaranteed returns with no market risk — predictable but taxable. PPF offers similar or lower rates but with complete tax exemption (EEE status) and a 15-year lock-in — better for long-term tax-saving. Equity mutual funds offer potentially higher returns over 5+ years but with market risk and no guaranteed return. RDs (Recurring Deposits) are like FDs but with monthly contributions instead of a lump sum — useful if you don't have a large amount to invest upfront. Choose based on your tenure, tax bracket, and risk appetite.
Disclaimer: This calculator provides illustrative maturity estimates based on quarterly compounding. Actual returns depend on your bank's compounding frequency, applicable TDS deductions, and any premature withdrawal penalties. FD interest rates are subject to change at the time of renewal. DICGC insurance covers up to ₹5 lakh per depositor per bank. This is not financial advice — consult a qualified CA or SEBI-registered adviser before making investment decisions.