Question 1

Q1: What is the fixed deposit calculation formula?

Accepted Answer

The fixed deposit calculation formula for a cumulative FD is A = P × (1 + r/n)^(n × t), where A is the maturity value, P is the principal, r is the annual rate as a decimal, n is the number of compounding periods per year (4 for quarterly, which is the Indian bank default), and t is the tenure in years. For ₹10 lakh at 7.25% quarterly-compounded for 5 years, the maturity works out to ₹14.33 lakh.

Question 2

Q2: How is fixed deposit interest calculated monthly vs quarterly vs annually?

Accepted Answer

The compounding frequency changes the effective yield even when the headline rate is the same. A 7.25% FD compounded monthly produces an effective annual yield of 7.50%. Quarterly produces 7.45%. Annual produces 7.25% flat. The bank default for cumulative FDs in India is quarterly. For non-cumulative payouts, simple interest is applied at each interval: annual rate divided by 12 for monthly payouts.

Question 3

Q3: What is the difference between cumulative and non-cumulative fixed deposits?

Accepted Answer

A cumulative FD reinvests all interest at each compounding period and pays principal plus accumulated interest at maturity, this is the wealth-building mode. A non-cumulative FD pays interest at fixed intervals (monthly, quarterly, or yearly) and returns only the principal at maturity: this is the income-replacement mode. Same product, same rate, dramatically different cash flow.

Question 4

Q4: How is TDS on fixed deposit calculated?

Accepted Answer

The bank deducts 10% TDS at source on FD interest once your cumulative interest from that bank in the financial year crosses ₹40,000 (₹50,000 for senior citizens). Without a PAN registered, TDS jumps to 20%. NRIs face a 30% flat rate on NRO FDs. Critically, TDS is not the final tax, your full slab rate applies on filing, with the TDS counting as a credit.

Question 5

Q5: How to calculate fixed deposit interest in Excel?

Accepted Answer

Two approaches.

(1) Use Excel's built-in FV() function: =FV(rate/n, n*t, 0, -P, 0) — for ₹10 lakh at 7.25% quarterly for 5 years, that's =FV(0.0725/4, 4*5, 0, -1000000, 0), which returns ₹14,32,366.

(2) Use POWER() longhand: =P*POWER((1+r/n), n*t). Both produce the same result. The Excel template attached to this page has both methods pre-built, plus cumulative, non-cumulative, ladder, and post-tax tabs.

Question 6

Q6: Can I get a loan against my fixed deposit?

Accepted Answer

Yes. Most banks offer a loan against your fixed deposit equal to 75–90% of the FD value, as either an overdraft or a term loan. Interest charged is typically 100–200 basis points above the FD's interest rate. So a 7.25% FD can collateralise a loan at roughly 8.25–9.25%. The FD continues to compound undisturbed during the loan tenure, which makes a loan-against-FD cheaper than premature withdrawal for short-term liquidity needs.

Question 7

Q7: Is fixed deposit interest taxable in India?

Accepted Answer

Yes, FD interest is fully taxable as 'Income from Other Sources' at your applicable slab rate: 5%, 20%, or 30% plus cess and surcharge. It is not eligible for the LTCG-style concessional rates that apply to equity. Senior citizens get a ₹50,000 deduction under Section 80TTB. For affluent investors in the 30% slab, post-tax FD returns barely beat inflation across most rate cycles.

Question 8

Q8: FD vs SIP: which gives better returns?

Accepted Answer

Across the last 10 years (FY17–FY26), Nifty 500 SIPs delivered roughly 13.5% CAGR while average FD rates ranged 6.5–7%. Post-tax in the 30% slab, the gap widens further because equity LTCG is taxed at 12.5% above ₹1.25 lakh while FD interest is taxed at full slab. For 7-year-plus horizons, equity SIPs have materially outperformed fixed deposits. FDs remain the right choice for 6-month emergency funds and 1–3 year goals where capital safety dominates.

Question 9

Q9: How do I build a fixed deposit ladder?

Accepted Answer

Split your FD corpus into multiple FDs of equal size with staggered maturities. For ₹50 lakh, that's five ₹10 lakh FDs maturing in years 1, 2, 3, 4, and 5. As each one matures, reinvest it as a fresh 5-year FD. Result: one FD matures every year, you avoid premature-withdrawal penalties when you need cash, and reinvestment captures rising rates without locking in falling ones.

Question 10

Q10: What is the difference between an FD and a recurring deposit?

Accepted Answer

An FD is a single lump-sum deposit at the start. A recurring deposit (RD) is a monthly contribution over the tenure, similar to a SIP. The recurring fixed deposit calculator tab on this page handles RDs. The FD interest formula compounds on the full principal from day 1, while the RD compounds on each monthly installment separately. RDs are useful for investors saving from monthly income; FDs for investors with idle capital.

Question 11

Q11: Are senior citizens taxed differently on fixed deposit interest?

Accepted Answer

Senior citizens get two benefits.

(1) Banks typically offer 0.5% higher rates than regular customers on the same FD product.

(2) Section 80TTB allows a ₹50,000 deduction on aggregate interest from FDs and savings accounts much higher than the ₹10,000 Section 80TTA limit available to regular taxpayers. Combined, these reduce the post-tax cost of holding FDs significantly for retirees.

Question 12

Q12: Can NRIs invest in fixed deposits in India?

Accepted Answer

Yes. NRIs can hold three FD types: NRE (Non-Resident External, rupee-denominated, interest tax-free in India), NRO (Non-Resident Ordinary, rupee-denominated, interest taxed at 30% TDS), and FCNR(B) (Foreign Currency Non-Resident Bank, held in USD/GBP/EUR/etc., insulated from rupee depreciation). The calculator on this page accepts the NRI customer profile and adjusts the TDS rate accordingly.

Question 13

Q13: What is the maximum amount insured under DICGC?

Accepted Answer

DICGC insures up to ₹5 lakh per depositor per bank, covering both principal and accrued interest. This applies identically to public-sector banks, private banks, and small finance banks. Investors with larger corpora typically split across multiple banks to preserve the guarantee, or accept the credit risk above the threshold for larger banks they trust.

Question 14

Q14: Are FD returns guaranteed?

Accepted Answer

FD returns are contractually guaranteed by the issuing bank at the rate fixed at issuance, but the guarantee is only as strong as the bank itself. DICGC insurance covers up to ₹5 lakh per depositor per bank. Bank failures in India are rare but not zero: in the last decade, depositors at PMC Bank, Yes Bank (briefly), and a handful of co-operative banks have had their FDs frozen. The structural lesson is to diversify FDs across banks once corpus exceeds the DICGC limit.

HDFC Bank FD Calculator

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HDFC Bank FD Calculator

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