FD Calculator

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

Nominal 7% is really 7.19%

Place 1,00,000 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 earns interest itself.

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

At 7% that effective rate is 7.19%. At 7.25% it is 7.45%. Whenever you compare a deposit against any other instrument, the effective rate is the number that makes the comparison honest — a bond paying 7.15% annually is worse than a deposit quoting 7%, not better.

Why quarterly, and when it is wrong

Quarterly compounding is the standard convention among Indian banks, so it is what this tool implements, and the interface says so beneath the result. It is not universal. Deposits elsewhere may compound annually, monthly, or only at maturity, and a non-cumulative deposit that pays interest out each quarter does not compound at all — the maturity value is simply the principal back.

If your bank's terms say anything other than quarterly compounding, the figure here will be slightly optimistic. Read the deposit advice rather than assuming.

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. Your credited amount will be lower, and the exact reduction depends on your slab and on whether you have filed the relevant declaration.

Breaking the deposit. Premature withdrawal is normally paid at the rate applicable to 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. None of that is modelled — the calculation assumes the deposit runs its full term untouched.

Rate changes. The rate is fixed for this deposit, which is the point of the product, but it also means a deposit locked in before a rate rise underperforms for years. Laddering across several maturities is the usual answer, and it is not something a single-deposit calculator can show you.

Comparing a deposit against alternatives

The honest comparison is 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%, that is a small real loss of purchasing power despite the positive number on the statement. Deposits buy certainty and liquidity, not growth, and treating them as a growth product is the mistake this page would rather you avoided.

Nearby tools

For monthly instalments into a deposit rather than 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.