.png)
FD Calculator
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It is a secure investment option that guarantees returns.
Cumulative vs. Non-Cumulative FD
Understanding the type of FD is crucial for your investment strategy:
- Cumulative FD: The interest is compounded (usually quarterly or annually) and paid out at the time of maturity along with the principal amount. This calculator computes returns for a cumulative FD.
- Non-Cumulative FD: The interest is paid out at regular intervals (monthly, quarterly, half-yearly, or annually) and is not reinvested. This is suitable for investors seeking a regular income stream.
Taxation on FD Interest
The interest earned on a Fixed Deposit is fully taxable. It is added to your total income and taxed as per the applicable income tax slab. Banks are also required to deduct Tax at Source (TDS) if the interest income exceeds ₹40,000 in a financial year (₹50,000 for senior citizens).
Tips for FD Investment
Maximize your returns from FDs with these tips:
- Laddering: Instead of investing a lump sum in a single FD, split it into multiple FDs with different tenures. This ensures liquidity and allows you to benefit from rising interest rates.
- Compare Rates: Different banks offer different interest rates. Always compare the rates before investing to get the best return.
- Consider Tenure: Choose a tenure that aligns with your financial goals. Premature withdrawal often comes with a penalty.
Understanding the FD Calculation Formula
The maturity value of an FD is calculated using the compound interest formula:
- A = Maturity Amount
- P = Principal Amount
- r = Annual Rate of Interest
- t = Tenure in Years
- n = Compounding Frequency per year