FD Calculator

A fixed deposit quotes one rate and pays another. The gap comes from compounding frequency, and this calculator shows it by reporting the effective annual rate next to the maturity value.

Nominal 7% is really 7.19%

Put 1,00,000 in for five years at a quoted 7% and the maturity amount is 1,41,477.82, of which 41,477.82 is interest. The quoted figure is a nominal annual rate. Interest is credited every quarter, and then that interest earns interest too.

Maturity = P × (1 + r/4)^(4 × years)
Effective annual rate = (1 + r/4)^4 − 1

At 7% the effective rate is 7.19%. At 7.25% it's 7.45%. When you compare a deposit with any other instrument, use the effective rate. A bond paying 7.15% annually is actually worse than a deposit quoting 7%.

Why quarterly, and when that's wrong

Quarterly compounding is the standard convention among Indian banks, so that's what this tool uses, and the interface says so beneath the result. It isn't universal, though. Deposits elsewhere may compound annually, monthly, or only at maturity. A non-cumulative deposit that pays interest out each quarter doesn't compound at all, and its maturity value is just the principal back.

If your bank's terms say anything other than quarterly compounding, the figure here will be slightly optimistic. Check the deposit advice; don't assume.

Three things the maturity figure ignores

Tax. Interest on a fixed deposit is taxable as income, and banks deduct tax at source once the interest crosses the statutory threshold. The number shown is gross. The amount credited to you will be lower, and by how much depends on your slab and on whether you've filed the relevant declaration.

Breaking the deposit. If you withdraw early, you're normally paid the rate for the period the money actually stayed, minus a penalty. A five-year deposit closed at eighteen months can earn materially less than the eighteen-month card rate. The calculator doesn't model any of this. It assumes the deposit runs its full term untouched.

Rate changes. The rate is fixed for this deposit, which is the whole point of the product. It also means a deposit locked in just before a rate rise underperforms for years. The usual answer is laddering across several maturities, and a single-deposit calculator can't show you that.

Comparing a deposit against alternatives

For a fair comparison, look at the return after tax and after inflation. A deposit earning an effective 7.19% gross, taxed at 30%, nets roughly 5.03%. If prices are rising at 6%, you're losing a little purchasing power in real terms, even though the statement shows a positive number. Deposits buy certainty and liquidity, not growth, and it's a mistake to treat them as a growth product.

Nearby tools

For monthly instalments into a deposit instead of a lump sum, use the RD calculator. To model other compounding frequencies, including annual and daily, use the compound interest calculator. For a tax-free statutory alternative with a long lock-in, see the PPF calculator, and to check the real return after price rises, the inflation calculator.