Fixed Deposits offer predictable returns. Discuss if FDs are the right fit for your financial goals with our advisors.
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is a financial instrument provided by banks or Non-Banking Financial Companies (NBFCs) which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. It requires the deposit of a lump sum amount for a fixed period.
How FD Interest is Calculated
FD interest is typically calculated using the compound interest formula:
Maturity Value = P × (1 + r/n)^(n×t)
Where:
P = Principal Amount
r = Annual Interest Rate (as a decimal)
t = Tenure in Years
n = Number of times interest is compounded per year (e.g., 1 for yearly, 4 for quarterly)
The total interest earned is the Maturity Value minus the Principal Amount. Banks usually compound interest quarterly for FDs.
Key Features of FD
Fixed Returns: Offers a predetermined interest rate for the entire tenure, providing certainty of returns.
Flexible Tenure: Ranges typically from 7 days to 10 years.
Safety: Bank FDs are considered relatively safe, with deposits up to ₹5 Lakh insured by DICGC.
Liquidity: Premature withdrawal is usually allowed, but often with a penalty (lower interest rate).
Loan Facility: Loans can often be availed against the FD amount.
Taxation: Interest earned on FDs is added to your income and taxed as per your applicable income tax slab. TDS is deducted by the bank if interest exceeds certain limits (₹40,000 for regular individuals, ₹50,000 for senior citizens per financial year).
Disclaimer: This calculator provides an estimate based on the inputs and selected compounding frequency. Interest rates vary between banks and are subject to change. TDS rules may change. Consult your bank or a financial advisor for specific FD details and tax implications.