FD Calculator

How Fixed Deposit Interest Works

A Fixed Deposit (FD) is a savings instrument where you deposit a lump sum with a bank for a fixed tenure at a predetermined interest rate. The bank compounds your interest — most commonly on a quarterly basis — and returns the maturity amount at the end of the tenure.

The compound interest formula is: A = P × (1 + r/n)^n×t, where P is your principal, r is the annual interest rate, n is the compounding frequency, and t is the tenure in years.

The TDS Problem Nobody Talks About

When your FD interest exceeds ₹40,000 per year (₹50,000 for senior citizens), the bank deducts TDS before crediting your account. While banks deduct at 10%, your actual liability is at your slab rate. If you're in the 30% slab, you owe additional tax when filing returns.

This means a "7% FD" actually gives you:

• At 30% slab: ~4.9% effective return
• At 20% slab: ~5.6% effective return
• At 5% slab: ~6.65% effective return

The Inflation Reality

Here's what most calculators won't show you: at 6% inflation, even the pre-tax 7% FD rate barely beats inflation. After tax, you're often at 4.9% — well below 6% inflation. Your FD is silently losing purchasing power every year.

Example: ₹5,00,000 in an FD at 7% for 5 years (30% slab, 6% inflation):

• Nominal maturity: ₹7,07,862
• After TDS at slab: ~₹6,38,000
• Inflation-adjusted (today's value): ~₹4,77,000 — less than you started with

When FD Still Makes Sense

Despite the real return problem, FDs are appropriate for:

• Emergency fund — guaranteed liquidity with no market risk
• Short-term goals (1-2 years) — too short for equity volatility
• Senior citizens — regular income via interest payout + higher threshold
• Retirees in 0% slab — no TDS with Form 15H, full rate earned

How to Use This FD Calculator

1. Enter your deposit amount (principal)
2. Set the interest rate offered by your bank
3. Choose tenure — most banks offer best rates for 3-5 year FDs
4. Select compounding frequency (quarterly is most common in India)
5. Choose your tax slab to see post-TDS maturity amount
6. Toggle inflation to see the reality — what your maturity amount actually buys

FD vs Other Options

If your FD's real return is negative after inflation and tax, consider these alternatives for long-term goals:

• SIP in index funds — 10-12% historical returns, tax-efficient (LTCG only on redemption)
• PPF — 7.1% tax-free (EEE), but 15-year lock-in
• Debt mutual funds — similar returns to FD but more tax-efficient for high-slab investors