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Fixed Deposit Engine

Multi-frequency compounding.

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Next Up Calculators

Bonds

Current yield & YTM for G-Secs and corporate bonds.

RD

Monthly bank RD maturity projector.

PPF

Statutory tax-exempt 15-year compounding.

NSC

National Savings Certificate 5-yr compounding.

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Verdict

Maturity Value

₹7.07 L

Interest earned: ₹2.07 L

Principal

₹5 L

Interest

₹2.07 L

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Next Up Calculators

Bonds

Current yield & YTM for G-Secs and corporate bonds.

RD

Monthly bank RD maturity projector.

PPF

Statutory tax-exempt 15-year compounding.

NSC

National Savings Certificate 5-yr compounding.

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Fixed Deposits — Engineering Predictable Returns with Compounding Frequency

Fixed Deposits remain the foundational debt instrument for Indian households — capital-preserving, principal-guaranteed (up to ₹5L per bank via DICGC), and predictable. The single most underrated lever in FD return optimisation is compounding frequency: quarterly compounding routinely outperforms annual by 30–50 bps on a 5-year horizon.

The Formula

FV = P × (1 + r/n)^(n·t), where n is compounding events per year.

Tax Treatment (India)

Interest is fully taxable at slab rate. TDS at 10% above ₹40,000/yr per bank (₹50,000 for seniors). Senior Citizen Savings Scheme and Tax-Saver 5-yr FDs offer better post-tax economics for many investors.

Frequently Asked Questions

How is FD interest calculated?

FD maturity uses compound interest: FV = P × (1 + r/n)^(n×t), where r is annual rate, n is compounding frequency (quarterly is standard in India), and t is tenure in years. Quarterly compounding gives a slightly higher effective yield than annual.

Are FDs better than debt mutual funds?

FDs offer guaranteed returns and DICGC insurance up to ₹5 lakh per bank. Debt funds offer higher post-tax returns for investors in the 20-30% slab, plus liquidity. For ultra-conservative or sub-₹5L corpus, FDs win. For larger amounts, debt funds usually win.

How is FD interest taxed in India?

FD interest is fully taxable at your slab rate, with 10% TDS deducted by the bank if annual interest exceeds ₹40,000 (₹50,000 for seniors). Submit Form 15G/15H if your total income is below the taxable limit to avoid TDS.

What is the best FD strategy?

Use FD laddering — split the corpus across 1, 2, 3, 4, 5-year FDs so one matures every year. This balances liquidity with the higher rates available on longer tenures, and lets you reinvest at prevailing rates without rate-cycle timing risk.

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