What is the FD interest calculation formula?

FD maturity amount = P × (1 + r/n)^(n×t), where P is the principal, r is the annual interest rate, n is the compounding frequency per year (4 for quarterly, 12 for monthly), and t is the tenure in years. Most Indian banks compound FD interest quarterly.

Is FD amount safe if the bank fails?

DICGC (Deposit Insurance and Credit Guarantee Corporation), a subsidiary of RBI, insures bank deposits up to ₹5 lakh per depositor per bank. This covers savings accounts, FDs, and RDs combined. For amounts above ₹5 lakh, spread deposits across multiple banks.

What is a tax-saving FD?

A tax-saving FD is a 5-year fixed deposit that qualifies for deduction up to ₹1.5 lakh under Section 80C (old tax regime only). It cannot be broken prematurely and cannot be pledged as collateral. The interest earned is taxable at your income tax slab rate.

FD Calculator – Fixed Deposit Maturity & Interest

Principal Amount₹1,00,000

Interest Rate (p.a.)7%

Time Period5 yr

Maturity Value

₹1,41,478

You invested —

Interest earned —

Interest Earned

—

Principal

—

Principal Amount₹1,00,000

Interest Earned₹41,478

Maturity Amount₹1,41,478

💡 Interest is compounded based on the selected compounding frequency. Senior citizens usually get an additional 0.25–0.50% on FD rates.

On this page

What is FD
Formula
Example
Maximise FD Returns
Rates Comparison
FD vs Mutual Fund
Tax on FD
FAQ

What is a Fixed Deposit (FD)?

A Fixed Deposit (FD) is a financial instrument offered by banks and NBFCs where you deposit a lump sum for a fixed tenure at a predetermined interest rate. Unlike a savings account, the rate is locked in for the entire duration, making FDs immune to interest rate fluctuations after investment. FDs are governed by RBI guidelines and are one of the safest investment options in India.

Deposits up to ₹5 lakh per depositor per bank are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of RBI, providing an important safety net.

FD Interest Calculation Formula

Compound Interest Formula (used for FD maturity) A = P × (1 + r/n)^(n×t)

A = Maturity amount | P = Principal
r = Annual interest rate | n = Compounding frequency per year
t = Tenure in years

Compounding: Quarterly (n=4) · Monthly (n=12) · Half-Yearly (n=2) · Yearly (n=1)

FD Calculation Example

📘 Example: ₹1,00,000 FD at 7% for 5 years (Quarterly Compounding)

Principal (P)	₹1,00,000
Annual Rate (r)	7%
Compounding (n)	4 (Quarterly)
Tenure (t)	5 years
Interest Earned	₹41,478
Maturity Amount	₹1,41,478

FD Rates Comparison (2024–25)

Bank	General (1–3 yr)	Senior Citizen
SBI	6.80%	7.30%
HDFC Bank	7.00%	7.50%
ICICI Bank	7.00%	7.50%
Axis Bank	7.10%	7.75%
Small Finance Banks	8.00–9.00%	8.50–9.50%

*Indicative rates. Check official bank websites for current rates.

Tax on FD Interest

FD interest is fully taxable as "Income from Other Sources" at your applicable income tax slab rate. Banks deduct TDS at 10% if annual interest from a single bank exceeds ₹40,000 (₹50,000 for senior citizens). Submit Form 15G (below 60 years) or 15H (senior citizens) to the bank if your total income is below the taxable limit to avoid TDS deduction.

How to Get the Best FD Interest Rate in India

Small Finance Banks (SFBs): AU, Ujjivan, ESAF, and Equitas regularly offer 8–9% — 1–2% higher than large banks. DICGC-insured up to ₹5L, equally safe for amounts below that limit.
Senior citizen rates: Investors 60+ get 0.25–0.75% extra. On a ₹10L 5-year FD, an extra 0.5% adds ~₹28,000 in interest.
Find the tenure sweet spot: Banks often offer peak rates at specific tenures — 390 days, 15 months, or 2 years. Check the full rate card before booking.
Choose cumulative (reinvestment) option: Compounds interest quarterly for higher effective yield vs monthly payout FDs.
FD laddering: Split across FDs at 1yr, 2yr, 3yr, 5yr maturities. Regular liquidity without sacrificing long-term rates.

FD vs Mutual Fund — Which is Better?

Feature	Fixed Deposit	Equity Mutual Fund
Returns	6.5–9% (guaranteed)	10–15% (market-linked)
Risk	Near zero (DICGC up to ₹5L)	Market risk; can fall short-term
Liquidity	Penalty on early exit	Redeem anytime (T+1 to T+3)
Tax	Fully taxable at slab rate	LTCG 12.5% after 1 yr (₹1.25L free)
Best for	Emergency fund, goals <3 years	Wealth creation, goals 5+ years

Frequently Asked Questions

Yes, most FDs allow premature withdrawal, but with a penalty — typically 0.5% to 1% reduction in the applicable rate. Some tax-saving FDs (under Sec 80C) have a mandatory 5-year lock-in and cannot be broken early. Always check the premature withdrawal terms before investing.

DICGC (a subsidiary of RBI) insures deposits up to ₹5 lakh per depositor per bank (across all accounts — savings, FD, RD). So if a bank fails, you're guaranteed to get back up to ₹5 lakh. For amounts above this, spread your FDs across multiple banks for safety.

In a cumulative FD, interest is compounded and paid at maturity along with the principal. In a non-cumulative FD, interest is paid out periodically (monthly, quarterly, or annually) — suitable for those needing regular income like retirees. Cumulative FDs generally yield a higher effective return due to compounding.

Yes. RBI allows banks to offer higher interest rates to senior citizens (age 60+) on FDs. Most banks offer an additional 0.25% to 0.75% above the general rate. Some banks also have special "super senior citizen" rates for those above 80 years.

A Tax-Saving FD is a 5-year fixed deposit that qualifies for deduction up to ₹1.5 lakh under Section 80C of the Income Tax Act (old regime only). The interest earned is taxable. It cannot be broken prematurely and cannot be used as collateral for a loan. The 5-year post office TD is a popular alternative with slightly higher rates.