What Is a Fixed Deposit?
A fixed deposit (FD) locks your money with a bank or NBFC for a fixed tenure at a stated interest rate. In return, you get predictable returns and capital protection (subject to institution risk — always check deposit insurance limits in your country).
Unlike a savings account, you generally cannot withdraw without penalty before maturity (or you earn a lower premature rate).
How FD Interest Compounds
Banks quote an annual rate but may compound quarterly or annually. More frequent compounding slightly increases effective yield.
Maturity A = P × (1 + r/n)^(n×t)
Or for simple cumulative FD products, the bank may publish annual effective yield directly.
Example: ₹1,00,000 at 7% p.a., quarterly compounding, 5 years:
- •Effective growth beats the same rate compounded once per year.
Cumulative vs Non-Cumulative
| Type | Behavior |
|---|---|
| Cumulative | Interest reinvested; paid at maturity (higher effective return) |
| Non-cumulative | Interest paid monthly/quarterly to your account (cash flow, lower compounding) |
Choose based on whether you need income now or growth later.
Tax and TDS
Interest on FDs is usually taxable as income in many jurisdictions. Banks may deduct TDS above thresholds — you still report total interest in your return.
Post-tax return = what matters for comparison with other investments.
How to Use This FD Calculator
Enter principal, annual rate, tenure, and compounding frequency. See maturity amount and interest earned. Compare tenures — sometimes longer FDs get better rates, but you lock liquidity.