FD Calculation Formula

Know the FD Calculation Formula to Calculate your Term Deposit Interest Rates in 2020

Fixed Deposit (FD) is an investment scheme that is considered secured since it offers good returns with zero risks. In an FD scheme, you can invest a lump sum amount for a fixed tenor at an agreed rate of interest. At the end of the maturity date, you will benefit the invested amount plus the compound interest. These FD schemes come with a lock-in-period, and thus, you cannot withdraw the interest amount before the date of maturity. You can check the maturity amount by using the FD interest rate calculator provided by financers on their official website.


Lending organisations offer a high rate of interest than a regular savings account. Although, the rate of interest varies depending on the financer you are investing in. The rate of interest depends on various factors such as the financer, investment tenor, residential status and the investor’s age.

Section 80(C) of the Income Tax Act specifies that FD account holders can claim for the tax deduction for investments up to Rs. 1.5 Lakh in a tax-saving FD account. Financers deduct the invested amount from the total gross income to estimate the account holder’s taxable income.

Interest rates on fixed deposit schemes

The minimum amount required to open a fixed deposit account depends on the financial institutions. Moreover, the rate of interest depends on the investment tenor and also the financer. Financers provide a slightly high rate of interest for senior citizens, ranging between 4% – 8.70%; while the interest rate for other citizens is between 3.50% – 8.35%.

Types of FD schemes as per interest rate calculation

There are 2 types of FD schemes. To know the difference between cumulative and non-cumulative fixed deposits, read below.

  • Cumulative FD scheme

Under the cumulative FD scheme, the interest is calculated quarterly or yearly and is paid at the end of the tenor. The amount you benefit from your investment is re-invested, and thus you get the benefit of compounding returns.

For example, if you invest Rs. 50,000 for a period of 2 years at a 7.35% interest rate, you will benefit an interest amount of Rs. 7,620. Similarly, you can check the maturity amount by using the FD interest rate calculator.

  • Non-cumulative FD scheme

In a non-cumulative FD scheme, you can invest the amount on a monthly, quarterly, half-yearly and yearly basis. Henceforth, you can withdraw the amount frequently at the end of each tenor. This scheme is suitable if you want to make your retirement funds pay you a monthly salary.

For example, if you invest an amount of Rs. 20 Lakh for a monthly non-cumulative period, at 8.05% rate of interest, the FD monthly interest will be Rs. 13,417. Moreover, you can also check the return amount with the help of the FD interest rate calculator.

Know how to calculate your term deposit interest rates

The amounts you benefit from your investment on FD schemes are determined by your interest rates and frequency of interest payouts. These interest rates are calculated periodically using the FD calculation formula.

The FD calculation formula is –

A = P (1+ r/4/100) ^ (4*n) and

A = P (1+ r/25)4n

Here, A refers to the maturity amount, P signifies the deposit amount, n is the compounded interest frequency and, r denotes the rate of interest.

For example, you have invested Rs. 1 Lakh in a fixed deposit at an 8% interest rate for a tenor of 3 years. 

In the above-mentioned formula, P is the principal amount, that is Rs. 1 Lakh, n is the tenor which is 3 years, and r denotes the interest rate offered which stands 8%. Henceforth, your maturity amount will be –

A = 100000*(1 + (8/25)) ^ (4*3)

A = Rs. 1,25,971 (maturity amount) 

Interest payout = Rs. 25,971

Beneficiaries who fall under the higher income tax slab rates of 20% and 30% are required to pay tax over and above the TDS charged as self-assessment tax. Financial institutions compute TDS on the interest amount earned. Henceforth, the tax on interest amount has to be paid annually rather than paying at the end of the tenor.

Now that you know the FD calculation formula, you can calculate the maturity amount by yourself or, you can use the FD interest rate calculator. If you know how to open a fixed deposit online, you can submit your documents and also make the deposit via online payment methods.