How fixed deposit maturity is calculated
A fixed deposit locks a sum with a bank for an agreed term at an agreed rate. Unlike market-linked investments, the maturity amount is known the day you open it — which is the entire appeal.
What varies between banks is the compounding frequency. Most compound quarterly, some monthly. The more often interest is added to the balance, the more the next interest calculation earns, so two deposits at the same headline rate can mature at different amounts.
Worked example
1,00,000 deposited for 5 years at 7% annual interest, compounded quarterly. That gives n = 4 and 20 compounding periods in total.
| Input | Value |
|---|
| Principal (P) | 1,00,000 |
| Annual rate | 7% |
| Compounding | Quarterly |
| Term | 5 years |
| Maturity amount | 1,41,477 |
| Interest earned | 41,477 |
Simple interest on the same deposit would pay only 35,000. The extra 6,477 is compounding alone — interest earning interest across twenty quarters.
How to use this calculator
- Enter the amount you want to deposit.
- Enter the rate the bank is offering for your chosen term.
- Select the compounding frequency stated in the bank's terms, not an assumed one.
- Set the term, and compare a longer term at the higher rate it usually carries.
- Remember that interest is taxable — the post-tax return is what matters.
Frequently asked questions
Is FD interest taxable?
In most jurisdictions yes, and it is generally added to your income and taxed at your applicable rate. Banks may also deduct tax at source once interest crosses a threshold. Check the current rules for your country, as thresholds change.
What happens if I break an FD early?
Banks typically pay interest at the rate applicable for the period actually completed, often minus a penalty of a fraction of a percent. You usually get your principal back, but the effective return can be well below the headline rate.
Cumulative or non-cumulative — which should I choose?
Cumulative reinvests interest until maturity, so it compounds and produces a larger final amount. Non-cumulative pays interest out periodically, which suits anyone who needs regular income but forgoes the compounding.
Does compounding frequency really matter?
It matters more as the term lengthens. Monthly compounding beats quarterly at the same nominal rate, and the gap widens over five or ten years. Compare the effective annual yield rather than the quoted rate.
Is an FD a good hedge against inflation?
Often not. If the deposit pays 7% and inflation runs at 6%, real growth is roughly 1% before tax — and can be negative after tax. FDs are best understood as capital preservation rather than wealth creation.
This calculator is an educational tool. Results are estimates based on the inputs you provide and do not constitute financial advice. Verify figures with your bank, broker or a qualified advisor before acting on them.