Author
LoansJagat Team
Read Time
5 Min
05 Jun 2025
How to Calculate Fixed Deposit Interest – Step-by-Step Guide
“Arre Ramesh Bhai, kal raat sapna aaya ki unka ₹1,00,000 ka FD karaya, aur ₹1,21,000 ban gaya teen saal mein!”
If you are wondering how that transformation happened, welcome to the world of fixed deposits: the silent but solid heroes of Indian savings.
Let us break it down. Say you invest ₹1,00,000 at 7 per cent annual interest compounded yearly for 3 years.
Using the formula:
Compound Interest = Principal × (1 + Rate/100)ⁿ – Principal
= ₹1,00,000 × (1 + 7/100)³ – ₹1,00,000
= ₹1,00,000 × 1.225043 – ₹1,00,000 = ₹22,504
Total at maturity = ₹1,22,504
Yes, just by parking your money and letting it chill for 3 years, you earn ₹22,504 without lifting a finger. The real magic lies in knowing how to calculate fixed deposit interest, because once you get it, you will never let your money sleep idle again.
So, buckle up. We are about to make fixed deposit calculations more fun than a Bollywood dance and more profitable than your cousin’s crypto investment.
What is Fixed Deposit Interest?
A fixed deposit is a savings scheme in which an individual invests a lump sum for a fixed tenure at a predetermined rate. Depending on the scheme, the interest earned can be either at maturity or at intervals.
The keyword here is how to calculate fixed deposit interest. Knowing this helps plan better for goals like travel, education, or that shiny new bike in the showroom.
Read More – Mutual Funds vs. Fixed Deposits in 2025
“Jitna zyada samay, utna zyada faayda; FD ka asli mantra yahi hai!”
How to Calculate Fixed Deposit Interest: The Core Formula
Understanding how to calculate fixed deposit interest is like riding a bicycle. Once learnt, it stays forever.
There are two common formulas based on the type of interest.
Simple Interest = (Principal × Rate × Time) / 100
Where:
- Principal = Initial investment
- Rate = Interest rate per annum
- Time = Duration in years
Compound Interest Formula
Compound Interest = Principal × (1 + Rate/100)ⁿ – Principal
Where:
- Principal = Initial investment
- Rate = Annual interest rate
- n = Number of years
This is where the magic of compounding steps in.
Simple Interest vs Compound Interest
Most banks in India offer compound interest on fixed deposits. However, knowing both gives a complete picture. Let us explore the difference with a table:
Particulars | Simple Interest | Compound Interest |
Basis | Interest on principal only | Interest on principal plus interest |
Formula Used | (P × R × T) / 100 | P × (1 + R/100)ⁿ – P |
Frequency | Usually annual | Quarterly, half-yearly or annually |
Returns | Lower compared to the compound | Higher due to interest on interest |
“Bina compound interest ke, FD toh sirf adha laddoo hai!”
Real-Life Examples: Meet Aarti and Harish
Case 1: Aarti’s Simple Interest Fixed Deposit
Aarti invests ₹50,000 in a simple interest fixed deposit at 6 per cent per annum for 3 years.
Using the formula:
Simple Interest = (50000 × 6 × 3) / 100 = ₹9,000
Total Amount at Maturity = ₹50,000 + ₹9,000 = ₹59,000
Aarti uses this to buy her nephew a new smartphone. Aunty goals.
Case 2: Harish’s Compound Interest Fixed Deposit
Harish invests ₹1,00,000 in a compound interest fixed deposit at 7 percent per annum for 3 years.
Using the formula:
Compound Interest = 100000 × (1 + 7/100)³ – 100000
= 100000 × (1.225043) – 100000
= ₹1,22,504 – ₹1,00,000 = ₹22,504
Total Amount at Maturity = ₹1,22,504
Harish is thrilled and books a Goa trip. Beach vibes unlocked.
Also Read - Bank FD Rates 2025: Top PSU Banks Offering Up to 7
Fixed Deposit Interest Calculation Table
To make how to calculate fixed deposit interest even easier, here is a summary table for quick reference.
Principal (₹) | Rate (%) | Time (Years) | Type | Interest Earned (₹) | Total Maturity (₹) |
50,000 | 6 | 3 | Simple | 9,000 | 59,000 |
1,00,000 | 7 | 3 | Compound | 22,504 | 1,22,504 |
75,000 | 6.5 | 5 | Compound | 28,007 | 1,03,007 |
“FD mein paisa daalo, aur interest ka jadoo chhupa lo!”
Official Online Tools to Calculate Fixed Deposit Interest
If manual calculation is not your cup of chai, online calculators are a blessing. Indian banks and financial platforms offer reliable tools.
Here are some official sources to try:
- State Bank of India FD Calculator
- HDFC FD Calculator
- ICICI FD Calculator
Using these tools, one only needs to enter the deposit amount, interest rate, and tenure. The maturity value appears instantly.
Tax on Fixed Deposit Interest in India
This part is important, yet often ignored. Interest earned on fixed deposits is taxable under the Income Tax Act.
- If the total interest exceeds ₹40,000 in a year, tax is deducted at source.
- For senior citizens, the threshold is ₹50,000.
- One can submit Form 15G or Form 15H to avoid tax deduction if income is below the taxable limit.
So before rejoicing, always factor in the taxman’s slice.
“Tax ka chakkar zyada samjho, FD ka interest kam na samjho!”
Tips to Maximise Your FD Returns
Here are some funky but effective tips to squeeze the most out of your fixed deposits:
- Compare Rates: Use portals like BankBazaar or Groww for updated bank-wise rates.
- Go for Longer Tenures: Compounding works better with time.
- Ladder Your FDs: Spread your investments across tenures to balance liquidity and return.
- Opt for Quarterly Compounding: It gives better returns than annual compounding.
- Consider Cumulative FDs: Interest is paid on maturity and principal, making higher returns.
Conclusion: FD Se Dosti Karo, Paisa Badhte Dekho
Mastering how to calculate fixed deposit interest is not just about numbers. It is about planning, dreaming, and achieving goals.
Whether one is saving for a big wedding, a solo trip to Ladakh, or just that dream balcony garden, fixed deposits are a reliable friend. Calculating interest accurately helps make smarter decisions.
So the next time someone says, “I opened an FD yesterday,” you can ask them, “Toh kitna interest mila, bhai?” and understand the answer.
“FD mein paisa lagana hai, toh interest ka hisaab bhi samajhna hai!”
Ready to calculate your FD returns like a pro? Try your bank’s online tool and plan your next big purchase. FD ke saath zindagi set hai!
Frequently Asked Questions (FAQs)
Q1: Can fixed deposit interest be calculated manually without a calculator?
Yes, it can be calculated using simple or compound interest formulas. For simple interest, multiply the principal by rate and time, then divide by 100.
Q2: Is compound interest always better than simple interest for fixed deposits?
Yes, generally. Compound interest gives better returns because interest is calculated on both principal and accumulated interest over time.
Q3: How often is interest compounded in Indian fixed deposits?
Most Indian banks compound interest quarterly, which enhances the final maturity amount compared to annual compounding.
Q4: Can I break my fixed deposit before maturity?
Yes, you can, but banks may charge a penalty or offer a lower interest rate if the fixed deposit is withdrawn before the agreed tenure.
How to Guides – Investing, Trading & Wealth Building | ||
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
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