FD Calculator

How fixed deposit returns are calculated

A fixed deposit locks a sum with a bank for an agreed term at an agreed rate. Unlike market-linked investments, the return is contractual — barring bank failure, you will receive exactly what was agreed. That certainty is the product's entire appeal, and it is why FDs remain the default savings vehicle for a large share of households.

Most Indian banks compound FD interest quarterly, which is the convention this calculator uses:

A = P × (1 + r/4)^4t

Where P is the deposit, r is the annual rate as a decimal, and t is the tenure in years. Quarterly compounding means the effective yield is slightly higher than the headline rate — a 7% FD actually returns about 7.19% effective annually.

A worked example

Deposit 5,00,000 for five years at 7%. With quarterly compounding the maturity value comes to approximately 7,07,400, of which 2,07,400 is interest. The same deposit under simple interest would have earned only 1,75,000, so compounding adds roughly 32,400 over the term.

Note what happens with tenure. The same deposit for ten years reaches about 10,00,800 — the money roughly doubles. For FDs, the rule of 72 applies neatly: at 7%, expect a doubling in a little over ten years.

Cumulative versus non-cumulative

This calculator models a cumulative FD, where interest is reinvested and paid out as a single sum at maturity. Banks also offer non-cumulative FDs that pay interest monthly, quarterly, or annually into your account. Non-cumulative deposits return less overall because the interest never compounds, but they suit retirees and anyone who needs the income stream rather than a lump at the end.

Things that will reduce your actual return

• Tax. FD interest is added to your income and taxed at your slab rate. Banks deduct TDS once annual interest crosses the threshold. For a taxpayer in a higher bracket, a 7% FD can net closer to 4.9% after tax — which may be below inflation.
• Premature withdrawal penalty. Breaking an FD early usually means the bank recalculates interest at the rate applicable to the period actually held, minus a penalty of around 0.5–1%. Laddering several smaller deposits with staggered maturities avoids having to break one large one.
• Inflation. If your FD earns 7% before tax and inflation runs at 6%, the real gain is thin. FDs preserve capital reliably; they build wealth slowly.

Who FDs suit

Money you will need within one to three years, emergency reserves beyond your immediate savings account, and any capital where a loss would be genuinely damaging. For goals more than seven years out, the near-certain erosion of purchasing power makes an FD-only approach hard to justify. The comparison worth running is this calculator against the Lumpsum calculator for the same one-time amount and term, at the return you expect from the alternative.