Question 1

How is FD maturity value calculated?

Accepted Answer

Fixed deposits use compound interest: M = P × (1 + r/n)^(n·t), where P is the principal, r is the annual rate, n is the number of times interest compounds per year (quarterly for most banks, so n = 4), and t is the tenure in years. The more frequent the compounding, the higher the maturity value for the same headline rate.

Question 2

Does an FD beat inflation?

Accepted Answer

Often only barely, and sometimes not at all after tax. If your FD pays 7% while inflation runs 6%, your real return is about 0.9% — and if FD interest is taxed at your income slab, the post-tax real return can be negative. This calculator shows the inflation-adjusted maturity value so you can see the true growth, not just the headline interest.

Question 3

Is FD interest taxable?

Accepted Answer

In India, FD interest is fully taxable at your income-tax slab rate, and banks deduct TDS once annual interest crosses ₹40,000 (₹50,000 for senior citizens). In the US, CD interest is taxed as ordinary income. The maturity value shown here is pre-tax — factor in your tax rate to get the net return, which matters most for higher-rate taxpayers.

Question 4

What compounding frequency do banks use?

Accepted Answer

Most banks compound fixed deposits quarterly, which is the default here. Some offer monthly or half-yearly compounding, and a few pay simple interest on very short tenures. Switching from annual to quarterly compounding on a 7% 5-year FD adds a meaningful amount to the maturity value, so it's worth confirming with your bank.

Fixed Deposit (FD) Calculator

Calculation Methodology & Formulas

Real-World Compounding Projections

A 5-year FD at 7%, compounded quarterly

Frequently Asked Questions (FAQ)

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