What is a Fixed Deposit?
A Fixed Deposit (FD) is a financial tool that lets you invest a one-time lump sum for a fixed duration at a predetermined interest rate. It's one of the safest forms of investments and provides assured returns at maturity.
How Does the Calculator Work?
The calculator determines the maturity amount by taking into account your initial deposit amount, the annual interest rate, investment duration, and compounding frequency. It provides a clear forecast of your investment's future value.
FD Calculation Formula
A = P (1 + r/n)^(nt)
- A = Maturity amount
- P = Principal amount
- r = Annual interest rate (in decimal)
- n = Number of compounding periods per year
- t = Time in years
Understanding Compounding Options
Banks offer various compounding options—monthly, quarterly, half-yearly, and annually. Choosing a more frequent compounding option can yield better returns, but the difference may vary based on rate and tenure.
Tax on FD Returns
Interest earned from fixed deposits is fully taxable as per your income tax slab. If the total annual interest exceeds ₹40,000 (₹50,000 for senior citizens), TDS will be applicable at 10% if PAN is provided.
How to Use the FD Calculator
Simply input the deposit amount, choose the tenure, select the annual interest rate, and pick a compounding frequency. The tool will instantly display your maturity amount and total interest earned.
Frequently Asked Questions (FAQs)
What is a Fixed Deposit (FD)?
An FD is a secure investment option where money is locked for a fixed tenure, earning interest at a fixed rate, ensuring predictable returns.
Is interest from FDs taxable?
Yes, interest earned on FDs is taxable as per your income slab. Banks deduct TDS if annual interest crosses ₹40,000 (₹50,000 for senior citizens).
What does compounding frequency mean?
It indicates how often interest is calculated and added to your principal. More frequent compounding results in slightly higher maturity amounts.
Can I break an FD before maturity?
Yes, but it may involve a penalty and reduced interest rate depending on bank policies. Always check the terms before opting for premature withdrawal.