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FD Interest Rates Calculator

IndianMoney.com Research Team | Updated On Tuesday, February 12,2019, 06:53 PM

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FD Interest Rates Calculator

 

 

A fixed deposit FD, is a financial instrument provided by banks and non banking financial companies NBFCs, which offer investors a higher rate of interest than a regular savings account. It may or may not require a separate account. Fixed deposit is a traditional long term investment. Fixed deposits are considered one of the safest modes of investment in India.

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FD Interest Rates Calculator

How is FD interest calculated?

Consider the following example to understand how interest is calculated in FD: You make an investment of Rs 1,00,000 in a fixed deposit. The interest rate offered is at 8%. Term of the fixed deposit is 5 years. Banks usually pay interest on FD on a quarterly basis.

Method of compounding: Quarterly basis

A = amount at the end of 6th year

P = amount invested as principal

R = rate of interest offered

N = 4(compounded at the end of 3 months (quarterly) out of 12 months or 4 times a year).

T = period of investment = 6 years.
A = 1,00,000 (1+ 0.08/4) ^ (4*5) = INR 1,48,595.

If you make an investment of Rs 1,00,000, that becomes Rs 1,48,595 at the end of 5 years. You would have earned Rs 1,48,595 – Rs 1,00,000 = Rs 48,595 as interest on your fixed deposit at the end of 5 years.

Following are the factors affecting the FD Interest Rate:

  • Higher the amount deposited, higher would be the interest paid out.
  • Higher interest rates are offered if the amount is deposited over a longer period.
  • You get a higher interest rate if you choose to invest in cumulative fixed deposits.
  • Interest accumulated is minimal if the interest is compounded on a yearly basis while the interest accumulated is maximum if the interest is compounded on a quarterly basis.

·      The existing customers and senior citizens are offered a higher interest rate

What is maturity amount in FD?

The maturity amount in FD is the amount received at the end of fixed deposit period. The maturity amount in FD is the sum of principal and interest accumulated over the period of fixed deposit.

SEE ALSO:Know Fixed Deposits

Is interest on FD taxable?

FD investors need to remember that interest earned on FD is taxable. The interest amount earned on FD is treated as your income and taxed as per income tax slab. You must pay tax earned on interest income each year. This is called taxation on accrual basis.

How is TDS calculated on FD?

Government has mandated all banks and NBFCs to deduct TDS at 10% if the interest earned on FD is more than Rs 50,000 a year. Previously, the tax free interest amount was capped to Rs 10,000 a year. Tax free interest amount was hiked to Rs 50,000 per year from Rs 10,000 in 2019 budget.

SEE ALSO:What is meant by Fixed Deposit?

Is FD principal taxable?

The amount invested as principal in FD is not taxable. This is because the amount that is invested in FD is already taxed. However, the interest amount earned on FD is taxed as per your tax slabs as mentioned before.

Is FD taxable on maturity?

The interest amount earned on FD is taxed each year as per income tax slab, by adding to income from other sources. FD interest would be taxed each year regardless of the tenure of investment. The tenure of the fixed deposit maybe 1 year or 10 years, it doesn’t matter, Interest earned on FD is taxed each year as per the investor’s tax slab.

FD interest rates of popular banks and NBFCs

The table below shows the interest rates offered by popular banks on fixed deposit:

BANK

Normal Citizens

Senior Citizens

State Bank of India

5.75% – 6.85%

6.25% – 7.35%

HDFC Bank

3.50% – 7.40%

4.00% – 7.90%

ICICI Bank

4.00% – 7.50%

4.50% – 8.00%

Axis Bank

3.50% – 7.60%

3.50% – 8.25%

Kotak Mahindra Bank

3.50% – 7.30%

4.00% – 7.80%

IDFC Bank

4.00% – 8.25%

4.50% – 8.75%

Bank of Baroda

4.50% – 6.85%

5.00% – 7.35%

IDBI Bank

5.75% – 7.05%

5.75% – 7.55%

Indian Bank

4.50% – 6.75%

5.00% – 7.25%

PNB Bank

5.70% – 6.75%

6.20% – 7.25%

Allahabad Bank

5.00% – 6.75%

Andhra Bank

4.00% – 6.80%

4.50% – 7.30%

Bank of India

5.25% – 6.70%

5.25% – 7.20%

Canara Bank

5.75% – 7.00%

6.25% – 7.50%

Central Bank

4.75% – 6.60%

5.25% – 7.00%

Union Bank of India

5.00% – 6.85%

5.50% – 7.35%

Corporation Bank

4.50% – 6.80%

5.00% – 7.30%

Syndicate Bank

4.75% – 6.80%

5.25% – 7.30%

Citibank

3.00% – 7.50%

3.50% – 8.00%

HSBC Bank

3.15% – 7.00%

3.65% – 7.50%

Advantages of fixed deposits

·      Low-risk: Investing in fixed deposit is considered as the safest mode of investment.

·      Loan against FD:  FD is liquid, you can withdraw amount invested in FD with minimal penalties on interest rate during emergencies. However, banks sanction secured loans against FDs. Availing secured loans or credit cards against FDs have a benefit of banks and NBFCs charging low interest rate.

·      Steady income: The interest on FD is compounded quarterly in almost all the banks.  Thereby steady income is guaranteed by investing in FDs.

·      More for senior citizens: Almost every bank offers higher rate of interest for senior citizens. This makes FD a very attractive option for senior citizens to invest.

·      Tax perks: Investors investing in FD are eligible for tax deduction as per Section 80C of the Income Tax Act.

·      Option to reinvest: Investors can reinvest the matured amount of FD. This can be done by merely requesting the bank to open a new FD account post maturity of the current FD.

Disadvantages

·      Returns are not inflation beating: Interest amount earned on FD does not consider the rate of inflation and remains constant throughout the tenure of FD.

·      Less liquidity: Withdrawing from FD attracts penalties on interest amount earned on FD. Banks charge liquidation fee on both full and partial withdrawal of FD.

·      Less tax benefits: Even though investing in FD falls under Section 80C, the returns earned on FD are taxable as per income tax slab. For fixed deposit accounts, only the primary holder gets tax benefits.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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