How FD interest is calculated
For a cumulative FD of six months or more, banks in India compound interest quarterly:
A = P × (1 + r ÷ 400)^(4 × t)
- A = maturity amount
- P = deposit amount
- r = annual interest rate (%)
- t = tenure in years
Example: ₹5,00,000 at 7% for 5 years grows to ₹7,07,389, earning ₹2,07,389 in interest. Quarterly compounding makes a 7% FD yield about 7.19% a year.
Deposits shorter than six months earn simple interest instead: A = P × (1 + r × t ÷ 100).
FD maturity value for ₹1 lakh
| Rate | 1 year | 2 years | 3 years | 5 years |
|---|---|---|---|---|
| 6.5% | ₹1,06,660 | ₹1,13,764 | ₹1,21,341 | ₹1,38,042 |
| 7% | ₹1,07,186 | ₹1,14,888 | ₹1,23,144 | ₹1,41,478 |
| 7.5% | ₹1,07,714 | ₹1,16,022 | ₹1,24,972 | ₹1,44,995 |
Cumulative vs payout FDs
- Cumulative (at maturity): interest is added to the deposit every quarter and paid with the principal at the end. Best for growing savings.
- Quarterly payout: you receive P × r ÷ 4 every quarter. On ₹5 lakh at 7%, that is ₹8,750 a quarter.
- Monthly payout: banks pay the quarterly interest monthly at a slightly discounted value, because you receive it earlier — about ₹2,900 a month on ₹5 lakh at 7%.
With a payout FD your principal does not grow, so the total interest is lower than a cumulative FD of the same rate.
Tax on FD interest
- FD interest is added to your income and taxed at your slab rate.
- Banks deduct TDS at 10% if your interest from one bank crosses ₹50,000 in a year (₹1 lakh for senior citizens), or 20% without a PAN.
- If your total income is below the taxable limit, submit Form 15G (or 15H if you are 60+) to avoid TDS.
- A 5-year tax-saving FD qualifies for deduction under Section 80C (old regime) but cannot be withdrawn early.
How to use this FD calculator
- Enter the deposit amount and the interest rate your bank offers.
- Set the tenure in years and months.
- Choose when you want the interest — at maturity, every quarter or every month.
- Read the maturity amount and interest, or your regular payout.
Frequently asked questions
How is FD interest calculated in India?
Banks compound FD interest quarterly: A = P × (1 + r/400)^(4t). For deposits under six months they pay simple interest.
How much interest will I get on ₹1 lakh FD for 1 year?
At 7%, a cumulative FD pays about ₹7,186, so ₹1 lakh grows to ₹1,07,186 in a year.
Do senior citizens get higher FD rates?
Yes, most banks pay senior citizens 0.25% to 0.75% more. Enter the senior citizen rate from your bank to see the difference.
Is FD interest taxable?
Yes, at your income tax slab rate. TDS of 10% applies when interest from a bank exceeds ₹50,000 a year (₹1 lakh for senior citizens).
Can I break an FD before maturity?
Usually yes, with a penalty of about 0.5–1% on the interest rate. Tax-saving FDs have a 5-year lock-in and cannot be broken early.
What is the FD interest on ₹5 lakh for 5 years?
At 7% compounded quarterly, about ₹2,07,389 — the deposit grows to ₹7,07,389.