How Fixed Deposit (FD) Interest Is Calculated in India

A fixed deposit is the simplest way to grow idle money at a guaranteed rate — but the amount you get at maturity is a little more than "principal + rate × years" because of compounding. Here's how Indian banks actually calculate it.

The FD maturity formula

Most Indian banks compound cumulative FD interest quarterly, so the maturity value is:

M = P × (1 + r/400)^4t — where P is your deposit, r is the annual rate (%), and t is the tenure in years. Dividing by 400 turns the rate into a quarterly fraction, and 4t is the number of quarters. Interest earned is simply M − P.

You don't need to do this by hand — the FD calculator applies quarterly compounding and shows your maturity value, total interest and year-by-year growth instantly.

Why quarterly compounding matters

Because interest is added to your balance every three months and then itself earns interest, the effective yield is slightly higher than the headline rate. That's why a 7% FD returns a touch more than a flat 7% per year — the gap widens with longer tenures.

Cumulative vs non-cumulative FDs

In a cumulative FD, interest is reinvested and paid as a lump sum at maturity (this is what the calculator models). In a non-cumulative FD, interest is paid out monthly/quarterly and doesn't compound — better if you need regular income, but a smaller final amount.

Tax on FD interest

FD interest is fully taxable at your slab rate as "income from other sources." Banks deduct TDS at 10% once interest crosses ₹40,000 a year (₹50,000 for senior citizens). The calculator shows the pre-tax figure, so your net return will be a little lower.

The bottom line

FDs are safe and predictable, and quarterly compounding gives you a small bonus over the headline rate. Enter your amount, rate and tenure in the FD calculator to see exactly what you'll get — then compare it against inflation and your other options before locking in.