FD Calculator

How fixed deposit interest is calculated

Banks almost universally compound fixed-deposit interest quarterly. For a cumulative FD — one that reinvests interest and pays everything at maturity — the maturity value is:

A = P × (1 + r/400)^4t

where P is the deposit, r the annual rate in percent (r/400 is the quarterly rate as a decimal) and t the tenure in years — fractional tenures like 2.5 years work directly. Interest earned is A − P.

Worked example

Deposit 100,000 at 7% per year for 5 years: the quarterly rate is 7 ÷ 400 = 0.0175 and there are 4 × 5 = 20 quarters. A = 100,000 × (1.0175)²⁰ ≈ 141,478, so the FD earns about 41,478 in interest. Note that simple interest at 7% would have paid only 35,000 — quarterly compounding adds roughly 6,478.

Effective annual yield

Because of quarterly compounding, a quoted 7% actually grows your money at (1 + 7/400)⁴ − 1 ≈ 7.19% per year. This effective yield is the right number for comparing an FD against instruments that compound differently (savings accounts, bonds, debt funds). The calculator reports it alongside the maturity value.

Things to check before booking an FD

• Premature withdrawal usually costs a 0.5–1% rate penalty — ladder several smaller FDs instead of one big one.
• Interest is taxable as income in most jurisdictions; compare post-tax yield against alternatives.
• Senior-citizen rates are often 0.25–0.75% higher — enter the rate that actually applies to you.
• For payout (non-cumulative) FDs there is no compounding — this calculator models the cumulative variant.