FD Calculator

What is a Fixed Deposit?

A Fixed Deposit (FD) is a financial instrument offered by banks and non-banking financial companies (NBFCs) in India where a lump sum amount is deposited for a predetermined tenure at a fixed interest rate. Unlike savings accounts, the rate on an FD is locked in at the time of opening and does not change with market conditions during the tenure — making it one of the most predictable investment instruments available to Indian savers.

FDs have been the default choice for conservative Indian savers for decades, particularly for capital preservation, emergency funds, and short-to-medium-term financial goals. Their simplicity, widespread availability (every commercial bank offers them), and DICGC insurance cover up to ₹5 lakh make them an important component of most household balance sheets.

The FD compounding formula

For a cumulative FD, the maturity amount is calculated using the compound interest formula:

where A is the maturity amount, P is the principal, r is the annual interest rate (as a decimal), n is the compounding frequency per year (12 for monthly, 4 for quarterly, 1 for annually), and t is the tenure in years.

For a non-cumulative FD, interest is paid out periodically without reinvestment, so the effective interest is simple interest on the principal:

The principal is returned at maturity. Since interest is not reinvested, the total payout of a non-cumulative FD is always lower than that of a cumulative FD at the same rate and tenure.

Cumulative vs. non-cumulative: which should you choose?

The choice depends on whether you need periodic income or are building wealth:

• Cumulative FDs are better for wealth accumulation. By reinvesting interest, you benefit from compounding — earning interest on interest. Over a 5-year term, a ₹10 lakh FD at 7% compounded quarterly generates roughly ₹3.56 lakh in interest (maturity: ₹13.56 lakh) versus ₹3.5 lakh under simple interest (non-cumulative). The gap grows with tenure and rate.
• Non-cumulative FDs are suited for regular income needs — retired individuals or others who want periodic cash flows. Monthly or quarterly payout options provide predictable income, but this comes at the cost of foregone compounding.

Tax treatment of FD interest

FD interest is fully taxable as income from other sources in every financial year in which it accrues — not just when it is received. For a 5-year cumulative FD, you must pay tax on the accrued interest each year even though you receive it only at maturity. This is an important distinction that many depositors miss. The effective post-tax return is significantly lower for those in the 30% tax slab — a 7% FD effectively yields only about 4.9% post-tax for the highest bracket.

Banks deduct TDS at 10% when the aggregate interest from all FDs at a bank exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). If TDS is deducted but your effective tax rate is higher, you must pay the difference as advance tax or self-assessment tax.

Senior citizen FD benefits

Most scheduled commercial banks offer senior citizens (aged 60 and above) an additional 0.25–0.50% per annum over the regular FD rate. For example, if the regular 3-year FD rate is 7%, senior citizens would receive 7.25–7.5%. Additionally, the TDS threshold for senior citizens is ₹50,000 per bank per year versus ₹40,000 for others. Some banks under the Senior Citizens Savings Scheme (SCSS) through the post office offer even higher rates — check the current notified rate on the India Post website.

DICGC deposit insurance: what is covered?

The Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India, insures all deposits (savings, current, FD, recurring) at each insured bank up to ₹5 lakh per depositor. This ₹5 lakh limit covers both principal and interest across all accounts at the same bank. To maximise insurance coverage, large depositors sometimes spread deposits across multiple banks, ensuring no single bank exposure exceeds ₹5 lakh.

Importantly, DICGC insurance covers scheduled commercial banks, small finance banks, and registered cooperative banks — but does NOT cover NBFC deposits, company fixed deposits, or post office deposits. For NBFC FDs (which often offer higher rates), there is no deposit insurance, and the credit risk of the issuing NBFC must be assessed independently through its credit rating.

This page is educational only and does not constitute financial or investment advice. Interest rates shown are illustrative — actual FD rates vary by bank, tenure, and depositor category. FD interest is subject to income tax as per applicable slab rates. Please consult your bank and a tax adviser for accurate, personalised guidance.