# FD Calculator - Fixed Deposit Calculator

Created by Oghenekaro Elem
Reviewed by Steven Wooding
Last updated: Jun 05, 2023

FD calculator determines the maturity value of your fixed deposit amount. A fixed deposit gives you an almost risk-free, insured, and guaranteed return on your deposited amount. It is a safe investment option, better than a regular savings account for conservative investors. You can use the FD calculator to find out or compare different rates for maturity amount, earned interest, and payouts.

On a side note, you can also refer to our yield to maturity calculator for finding the rate of return that an investor can expect on a bond.

To reap the full benefit of a fixed deposit, you must understand how it works and how the fixed deposit rates get calculated in this FD calculator. By the end of this article, you'll learn what is fixed deposit to make an informed decision before committing to an investment.

Another risk-free investment solution that can generate steady income for you is the post office monthly income scheme.

## What is a fixed deposit?

A fixed deposit (FD) is a type of investment account in which you invest a specific amount of money at a fixed interest rate and term. Based on your instructions, at the end of the agreed period (term), the investment can either be rolled over (reinvested) or liquidated (returned to you) with the interest amount earned.

The financial institution or bank calculates your earned interest cumulatively monthly, quarterly, or annually, depending on how the interest compounds. Your financial provider may require you to open a new account for the FD or allow you 'fix' the money in an existing account you own. Then you can decide whether to withdraw the interest earned as regular payouts or you can reinvest it to compound your returns.

## Fixed deposit rates - How to calculate fixed deposit?

The term or period for a fixed deposit can vary between 30 days and 10 years, with interest rates ranging between 3% and 11%. Although the interest rates on fixed deposits are low compared to most investment vehicles, the returns are almost risk-free and much better than a regular savings account. Using the FD calculator as an FD rate calculator by inputting different interest rate values shows that the longer the term, the more accruing interest. Besides, the longer you fix your money, the higher the interest rate the banks will offer. Some financial institutions and banks even offer a 7-day FD at a considerable rate.

For example, a financial provider in India can offer three months fixed deposit with interest at 2.3%, and it goes up to 10% for a year. So, a ₹100,000 investment for three months earns you interest of ₹2,300 on your principal. In comparison, you'll earn ₹10,000 if you fix the same amount for a year. You can increase your interest if you increase your investment by another ₹100,000: ₹200,000 x 2.3% = ₹4,600.

Hence, you'll enjoy a higher interest rate and return with a longer-term and or a higher deposit amount.

We also have a risk calculator to help you choose between two options of investments based on the risk factor.

## How to improve your FD returns?

Other ways you can improve your return is by:

• Rolling over your original principal after the FD matures. The interest from your FD account is directly credited into your savings account by the bank.

• Roll-over the principal and interest. The original principal and the accrued interest are reinvested for the same term and interest rate applicable to maturity. That accumulates or compounds your investment.

• Shop for a better interest rate. Ensure you compare the rates from at least three financial providers before settling. The higher the interest rate, the higher your interest yields.

• Compounding frequency of interest. Your claim can be compounded monthly, quarterly, semi-annually, or annually. Make inquiries about how your financial provider compounds your interest because it affects your return and periodic payouts.

• Type of fixed deposit. Financial providers offer two types of FD accounts, which dictates how your interest gets invested.

## Types of fixed deposit

• Cumulative: Most financial institutions only allow you to compound your investment if your fixed deposit is for at least 90 days (3 months). When you invest in a cumulative fixed deposit, your interest is compounded annually and paid at maturity.

Some banks may allow you to withdraw your interests at the end of every compounding period – monthly, quarterly, semi-annually, or at the end of the term.

• Simple: If you choose a fixed deposit term below 90 days, the banks will usually calculate your interest based on the principal amount of your investment alone. When you invest in a simple fixed deposit, you can withdraw your accrued interest as payouts periodically.

If you can't wait out your fixed deposit term, you can terminate it before it matures. But you will have to forego some of the accrued interest in your account or incur a penalty. You will also need to pay taxes on the interest earned during a financial year.

You might find our simple interest calculator and compound interest calculator interesting and informative, in case you are looking to learn about interests and how to calculate them.

## How to calculate fixed deposit interest? How does the FD calculator work?

How to calculate interest on FD formula depends on the type of FD account

The interest earned on a simple fixed deposit is calculated as simple interest with the formula:

matured amount = principal * (1 + (rate * term))

How to calculate compound interest on FD requires a little more advanced formula

The interest earned on cumulative fixed deposit is compounded. That is, the interest earned during the previous compounding period is added to the principal for calculation of interest using the formula:

matured amount = principal * (1 + rate / compounding frequency) ^ (compounding frequency * term)

## Benefits and Limitations of Fixed deposit

Benefits

• FD is a very safe, stable, and predictable mode of investment.
• It provides a higher interest rate than a regular savings account.
• You can terminate FD in case of an emergency.
• No limitation to how many FDs you can own.
• The interest rate for FDs is fixed when opening the deposit and remains free of inflation.
• Some financial providers offer preferential interest rates to senior citizens.
• You can take loans against your FD amount.
• Some banks offer a minimum term as low as seven days.

Limitations

• You'll earn less interest and may pay the penalty if you make a withdrawal before your FD matures.
• At the end of the term, you may have earned lesser than expected after adjusting for inflation. Other investment options like mutual funds may offer better inflation-adjusted returns.
• FD is best for wealth preservation. It is not a suitable investment vehicle for long-term wealth creation or investors with a high-risk appetite.
• The minimum amount to open a fixed deposit in some financial institutions may be too high to consider.

## FAQ

### How to calculate interest on FD formula?

There are two formulae to calculate the interest on a fixed deposit account.

1. Simple fixed deposit account requires that you add unity to the interest rate and term product and multiply the result with the principal you invested in the FD account. Then, deduct the principal from this result to get your accrued interest on investment.

accrued interest on FD = (principal * (1 + (rate * term))) - principal

1. Cumulative fixed deposit account is more advanced when calculating interest. You will have to raise the value of the sum of interest rate and unity divided by the compounding frequency of the account by the product of the compounding frequency and term. Then, multiply this result with the principal before deducting the principal to get your accrued interest.

This formula summarises how to calculate compound interest on FD:

accrued interest on FD = (principal * (1 + rate / compounding frequency) ^ (compounding frequency * term)) - principal

Compounding frequency for FD account is usually monthly, which means the value = 12. Otherwise, it can be quarterly = 4; semiannually = 2; or annually = 1.

### How to calculate income tax on FD interest?

The best way to determine your exact tax liability from your FD interest is to consult a tax advisor. However, if you want to estimate how much you'll have to pay in taxes, then you should use the FD interest formula to find your accrued interest and multiply the value with your tax slab percentage. That means that if your accumulated interest in the FD account is ₹1000 and you're in the 5% income tax slab in India, you will pay ₹1000 * 5% = ₹50 in tax. But don't worry about how to calculate income tax on FD interest now because it's a safe investment with returns worth more than the tax liability.

### Should I save my money in a FD account?

Suppose you want a risk-free investment with sure interest after the fixed term, yes! If you want higher returns, you may want to consider other riskier investment options. Use the FD calculator to decide what is acceptable for your unique situation.

### What is the difference between fixed deposit and recurring deposit account?

A fixed deposit account allows you to invest a lump sum amount at a fixed interest rate, while the recurring deposit lets you invest small amounts monthly at a fixed interest rate and term.

Oghenekaro Elem
Fixed deposit type
Cumulative
Principal amount
$Interest rate % Term yrs Compounding frequency Monthly Results Maturity amount$
Total interest
$Payout per interest period$
Total payout
\$
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