FD maturity formula
For a cumulative fixed deposit, interest is added to your balance at each compounding period and then earns interest itself:
- A = maturity amount, P = deposit
- r = annual interest rate ÷ 100
- n = compounding periods per year (4 for quarterly)
- t = tenure in years
Example: ₹1,00,000 at 7% for 3 years, compounded quarterly, matures at about ₹1,23,144 — ₹23,144 of interest. The effective annual yield is 7.19%, slightly higher than the quoted 7% because of compounding.
Cumulative vs non-cumulative FD
Cumulative FDs reinvest interest and pay everything at maturity — best for growing savings. Non-cumulative FDs pay interest out monthly or quarterly — useful for regular income, for example for retirees. Monthly payouts are slightly lower than the quoted rate because banks discount them for being paid early.
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 exceeds the threshold in a year (₹50,000 for most people and ₹1,00,000 for senior citizens from FY 2025-26). Submit Form 15G/15H if your total income is below the taxable limit.
- A 5-year tax-saver FD qualifies for deduction under Section 80C in the old tax regime.
Tips to earn more on FDs
- Compare banks. Small finance banks often pay 0.5%–1.5% more (deposits are insured up to ₹5 lakh per bank by DICGC).
- Senior citizens usually get an extra 0.25%–0.75%.
- Ladder your FDs across different maturities so money is available regularly and you can reinvest at new rates.
Frequently asked questions
How is FD interest calculated in Indian banks?
Most banks compound FD interest quarterly for cumulative deposits. For deposits under 6 months, simple interest is usually paid at maturity.
Is FD interest taxable?
Yes. It is added to your income and taxed at your slab rate. Banks deduct TDS above the yearly threshold.
What is the difference between FD rate and yield?
The rate is the quoted annual rate. The yield (effective annual rate) includes compounding, so it is slightly higher for cumulative FDs.
Can I break an FD early?
Usually yes, but banks charge a penalty, typically 0.5%–1% less interest than the rate for the period you actually stayed invested.