What is the FD?
A fixed deposit (FD) locks a single amount with a bank for a fixed tenure at a guaranteed interest rate. Indian banks compound FD interest quarterly, which makes your real (effective) yield slightly higher than the quoted card rate — a 7% FD actually yields about 7.19% a year.
FDs are the backbone of safe money in India: deposits up to ₹5 lakh per bank are insured by DICGC, returns are fixed on day one, and premature withdrawal is possible with a small penalty. They are ideal for goals within 1–3 years and for the fixed-income part of any portfolio.
Formula & worked example
With quarterly compounding, the maturity amount is:
where P is the deposit, r the annual rate and n the tenure in years.
Worked example: ₹5,00,000 at 7% for 5 years → A = 5,00,000 × (1 + 0.0175)20 = 5,00,000 × 1.4148 ≈ ₹7,07,389. Interest earned is ₹2,07,389 — about ₹17,400 more than the same FD with simple annual interest, purely from quarterly compounding.
How to use this fd calculator
- Enter the deposit amount and the rate from your bank’s FD card (senior citizens usually get +0.25–0.50%).
- Set the tenure — try 1, 3 and 5 years to compare bank slabs, which often peak at odd tenures like 444 or 555 days.
- Read the maturity value and the effective annual yield; the year table shows growth if you stay invested.
Smart tips
- Ladder your FDs: split a large amount into 1/2/3-year deposits so some money matures every year — liquidity without breaking FDs.
- Interest is fully taxable at your slab; banks deduct 10% TDS when yearly FD interest crosses ₹50,000 (₹1 lakh for senior citizens). Submit 15G/15H if your income is below the taxable limit.
- Compare small finance banks — they often pay 0.5–1% more and carry the same ₹5 lakh DICGC insurance.
- For goals beyond 5 years, compare the post-tax FD return with debt funds and PPF before defaulting to an FD.
- Avoid auto-renewal at "card rate" — rates change; renew deliberately into the best current slab.
Frequently asked questions
How is FD interest calculated?
Indian banks compound FD interest quarterly: A = P(1 + r/4)^(4n). This calculator uses the same convention, so its result matches bank FD receipts to within a rupee or two of rounding.
Is FD interest taxable?
Yes — fully taxable as "income from other sources" at your slab rate, every year on accrual. TDS of 10% applies once interest crosses ₹50,000 a year per bank (₹1,00,000 for senior citizens), but TDS is not the final tax.
What happens if I break an FD early?
Banks pay interest for the period the money actually stayed, at the rate applicable to that period, usually minus a 0.5–1% penalty. Laddering several smaller FDs avoids breaking a big one.
Are FDs safe?
Bank FDs are among the safest instruments in India: DICGC insures principal + interest up to ₹5 lakh per depositor per bank. Spread larger amounts across banks to stay fully insured.
FD vs debt mutual fund — which is better?
FDs give a guaranteed, known return; debt funds offer market-linked returns, easier partial withdrawal, and can suit longer horizons. After the 2023 tax change both are taxed at slab, so for most savers the deciding factors are guarantee vs flexibility.
Want the theory behind the numbers? Read our FD & savings guides on the Money Blog.