Fixed Deposit (FD) Interest & Maturity Calculator

Banker's Guide: FD Calculation, Compounding & Indian Tax Norms

The Compounding Logic: Why Quarterly is Standard in India

The majority of Indian banks calculate and compound interest on Fixed Deposits quarterly, even if the interest payment option chosen by the customer is monthly, yearly, or at maturity. This calculator uses the standard cumulative deposit formula.

The maturity value ($A$) is calculated based on quarterly compounding (where $n$ is the number of compounding periods per year, so $n=4$):

$\text{Maturity Amount} = P \times \left(1 + \frac{R/100}{n}\right)^{n \times T}$

Where:

$P$: Principal Amount
$R$: Annual Interest Rate
$T$: Tenure in Years
$n$: Compounding frequency (4 for Quarterly)

Key Tax & Operational Considerations (India)

TDS on FD Interest: Interest earned on FDs is fully taxable. Banks deduct TDS at 10% if the accrued interest exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year. The TDS is applied even if the interest is not paid out until maturity.
Premature Closure Penalty: Banks apply a penalty (typically 0.5% to 1.0% reduction) on the interest rate if the FD is broken prematurely. The interest will be paid at the lower rate applicable for the period the deposit actually ran or the contracted rate, whichever is lower.
Tax-Saver FDs: These FDs qualify for a deduction under Section 80C (up to ₹1.5 Lakh), but come with a mandatory 5-year lock-in period and generally do not allow premature withdrawal or loan facilities.

Frequently Asked Questions (FAQs) for Term Deposit Professionals

What is the minimum tenure for a Fixed Deposit in commercial banks?

As per RBI guidelines, the minimum tenure for a Fixed Deposit is 7 days. The maximum tenure is typically 10 years. Deposits below 7 days are generally not allowed, except in special cases such as inter-bank deposits.

Is quarterly interest compounding the same as quarterly interest payout?

No. Compounding is the frequency at which earned interest is added back to the principal to start earning interest itself. Payout is the frequency at which the bank actually sends the accumulated interest to the customer's account (e.g., monthly, quarterly, or at maturity). For Cumulative FDs, compounding is typically quarterly, but payout is at maturity.

Can a loan facility be availed against a Tax-Saver FD?

No. Because Tax-Saver FDs qualify for deduction under Section 80C and have a mandatory 5-year lock-in period, banks cannot offer a loan or overdraft facility against these specific deposits. This rule ensures the tax benefit is utilized for long-term savings.

What is the bank's responsibility regarding TDS on joint accounts?

In a joint FD account, the TDS certificate (Form 16A) is issued in the name of the first holder of the FD, as the first holder is usually the one considered primarily responsible for reporting the income. Banks must ensure the interest accrued is tracked against the first holder's PAN.

How is the interest on a broken (prematurely withdrawn) FD calculated?

When an FD is broken, the interest is not paid at the contracted rate. It is paid at the lower of two rates: (1) the rate applicable for the tenure the FD actually remained with the bank, OR (2) the original contracted rate. A penalty (e.g., 1%) is usually deducted from this new interest rate.

Professional Fixed Deposit (FD) Calculator

Banker's Guide: FD Calculation, Compounding & Indian Tax Norms

The Compounding Logic: Why Quarterly is Standard in India

Key Tax & Operational Considerations (India)

Frequently Asked Questions (FAQs) for Term Deposit Professionals