What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is one of the safest investment options in India where you deposit a lump sum amount with a bank for a fixed tenure at a predetermined interest rate. Unlike savings accounts, FD rates are fixed at the time of deposit and don't change during the tenure. FDs are ideal for risk-averse investors, senior citizens seeking regular income, and anyone looking to park surplus funds safely. Banks offer higher interest rates for FDs compared to savings accounts because your money is locked for a specific period. The interest on FDs is compounded quarterly in most Indian banks, meaning your interest earns interest every three months. This compounding effect makes FDs a powerful tool for wealth accumulation over longer tenures.
FD Maturity Formula
How to use this calculator
- Enter your deposit amount—the principal you want to invest
- Set the annual interest rate offered by your bank
- Choose the FD tenure in years
- View your maturity amount and total interest earned
When Should You Use an FD Calculator?
- Planning how much your deposit will grow at maturity
- Comparing FD offers from different banks at various rates
- Deciding between monthly interest payout vs cumulative FD
- Calculating interest earned for tax planning purposes
- Choosing optimal tenure for maximum returns
- Planning funds for specific goals like wedding, vacation, or down payment
Real-World Examples
Standard Bank FD
You have ₹5 lakhs to invest in a bank FD at 7% for 3 years with quarterly compounding.
💡 You earn ₹1.15 lakhs as interest. FD returns are taxable—if you're in 30% bracket, effective return is only about 4.9% after tax.
Senior Citizen FD
A 65-year-old invests ₹10 lakhs in senior citizen FD at 7.5% (0.5% extra) for 5 years.
💡 Senior citizens get 0.25-0.5% higher rates. Tax exemption up to ₹50,000 under Section 80TTB makes FD attractive for retirees.
Short-Term Parking
You want to park ₹2 lakhs for 1 year before a planned expense.
💡 Short-term FDs have lower rates. Consider liquid funds (6-7%) if you might need money earlier—FD premature withdrawal has penalty.
FD vs Other Savings Options
Compare fixed deposits with other popular savings and investment options.
| Feature | Fixed Deposit | Savings Account | Debt Mutual Fund |
|---|---|---|---|
| Returns (Typical) | 6-7.5% | 2.5-4% | 6-8% |
| Risk Level | Very Low | Very Low | Low |
| Liquidity | Low (penalty) | High | High |
| Lock-in Period | Yes (chosen) | None | None |
| Tax on Gains | As per slab | As per slab | With indexation |
| Insurance Cover | Up to ₹5L | Up to ₹5L | No |
Pro Tips for Fixed Deposit Investments
How FD Interest is Calculated
Most Indian banks calculate FD interest quarterly using compound interest formula: A = P(1 + r/4)^(4t), where P is principal, r is annual rate, and t is years. This means your interest earns interest every quarter. For example, ₹1 lakh at 7% for 1 year gives ₹7,186 (not ₹7,000) due to quarterly compounding.
Cumulative vs Non-Cumulative FD
Cumulative FDs reinvest interest and pay everything at maturity—ideal for wealth building. Non-cumulative FDs pay interest monthly/quarterly—good for regular income needs like retirees. Cumulative FDs earn slightly more due to compounding on reinvested interest.
Taxation on FD Interest
FD interest is fully taxable as per your income tax slab. Banks deduct 10% TDS if annual interest exceeds ₹40,000 (₹50,000 for senior citizens). If you're in 30% bracket, you'll need to pay additional 20% as self-assessment tax. Consider tax-free bonds or debt funds for better post-tax returns if you're in higher tax brackets.
Frequently Asked Questions
What is the interest rate on FD in 2024?
FD rates in 2024 range from 3% (very short term) to 7.5% (senior citizens, 1-3 year tenure). Major banks like SBI offer 6.5-7% for general public. Small finance banks offer up to 8%. Rates are higher for senior citizens (typically +0.5%) and for tenures of 1-3 years.
Is FD interest taxable?
Yes, FD interest is fully taxable as 'Income from Other Sources' at your applicable tax slab rate. Banks deduct 10% TDS if annual interest exceeds ₹40,000 (₹50,000 for senior citizens). You can submit Form 15G/15H to avoid TDS if your total income is below taxable limit.
Can I withdraw FD before maturity?
Yes, but premature withdrawal attracts a penalty of 0.5-1% lower interest rate than contracted. Some banks also have a minimum lock-in period (e.g., 7 days). For emergency needs, consider taking a loan against FD instead—you pay slightly higher interest but don't break the FD.
What happens to FD after maturity?
Most banks auto-renew FDs at the prevailing rate if you don't give other instructions. However, you usually have a 'grace period' of 7-14 days to withdraw without penalty. It's best to set reminders and decide actively—rates may have changed since your original deposit.
Is my FD safe if the bank fails?
FDs are insured by DICGC (Deposit Insurance) up to ₹5 lakhs per depositor per bank. This covers savings accounts + FDs + RDs combined. For larger amounts, consider splitting across multiple banks. Note: This insurance is on depositor level, not per FD.
Which is better: FD or RD?
FD is better if you have lump sum to invest—higher effective returns due to compounding from day one. RD (Recurring Deposit) is better for monthly savings discipline. A 1-year FD at 7% gives more returns than 12 monthly RD contributions at the same rate.