How banks calculate FD interest
Most Indian banks compound FD interest every quarter:
Maturity = P × (1 + r/4)4t
₹5,00,000 at 7% for 3 years matures at ₹6,15,720. Because of quarterly compounding the effective yearly return is 7.19%, a little higher than the 7% quoted.
Tax and TDS on FD interest
- FD interest is added to your income and taxed at your slab rate, in both regimes.
- The bank deducts 10% TDS once your interest with that bank crosses ₹50,000 in a year (₹1,00,000 for senior citizens). Without a PAN, TDS is 20%.
- If your total income is below the taxable limit, submit Form 15G (or 15H if you are 60+) at the start of the year to avoid TDS.
Tax-saver FD
A 5-year tax-saver FD qualifies for the 80C deduction in the old regime, but it cannot be broken early and its interest is still taxable.
Is my FD safe?
DICGC insures up to ₹5 lakh per depositor per bank, covering principal and interest together. Small finance banks often pay 1–1.5% more; keeping each deposit within the insured limit is a sensible way to use them.
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Questions people ask
Is FD interest paid monthly?
You can choose monthly or quarterly payout when you open the FD. Monthly payout is slightly lower because it is discounted for being paid early. Choose “Paid out” in the calculator.
What happens if I break an FD early?
Banks pay the rate for the period the money actually stayed, minus a penalty of usually 0.5–1%.