Fixed deposits are a reliable investment tool for growing and preserving your savings. FD stands as one of the safest and smartest diversification options to be included in an investor’s portfolio. With low volatility, investing in FDs is an easy way to arbitrage your risks and receive an assured amount when they mature.

With a CRISIL (Credit Rating Information Services of India Limited) rating of FAAA (F triple-A) which is the highest rating for financial instruments), fixed deposits are a great way of balancing your funds without curbing your returns.

Types of FDs

Standard fixed deposits

  • Money deposited for a fixed tenure
  • Rate of interest pre-determined by the bank
  • Tenure ranges from 7 days to 10 years
  • Interest rates higher than a savings account

Tax saving fixed deposits

  • An investor gets tax exemption up to Rs. 1.5 lakh in a year
  • Have a lock-in period of 5 years during which you cannot withdraw the amount
  • Only one-time lumpsum deposits allowed

Special fixed deposits

  • Invested for specific periods
  • The investor earns interest higher than standard FDs on withdrawing money for the specified period

Regular fixed deposits

  • Best fit for senior citizens looking for a constant source of income
  • Interest payout can be monthly or quarterly

Senior citizen fixed deposits

  • Provides an additional interest rate of around 0.50% to senior citizens
  • Tenures are flexible under this scheme

FD maturity calculations involve multiple complex variables. With an FD calculator, you can compare the maturity amount and interest rates of FDs offered by different financial institutions. Having all the accurate figures at your disposal helps you make a more informed decision.

The Formula for Calculating Fixed Deposit Interest

A=P(1+r/n)^n*t

where,

A – Maturity amount

P – Principal amount

r – Rate of interest

t – Number of years

n – Frequency of compounded interest

  • Firstly, the tenure of investment is determined. This is the driving factor of the investment rate. The longer an investor stays invested, the higher the interest rates.
  • Secondly, the additional rate of interest for senior citizens (also known as preferential interest rate) is determined. Some banks consider investors 60 years and above as senior citizens while some consider those who are 55 years and above.
  • Thirdly, the existing economic condition is a direct determining factor. Banks and other financial institutions consider economic conditions such as repo rate and inflation rate for determining interest rates on fixed deposits.
  • Lastly, the mode of calculation of interest is determined – either simple interest or compound interest.

Simple interest is earned on the principal amount invested at the predetermined rate prevailing during the investment tenure. On the other hand, compound interest refers to the interest earned on the principal amount invested and the interest earned.

Easy Steps To Calculate Interest

Calculating the return on fixed deposits might initially seem tedious but with the technological advent, calculating returns on FDs is now just a click away. Let’s look at 3 simple steps to be followed to reach the desired results.

  • Step 1: Choose the customer type
  • Step 2: Choose the kind of fixed deposit you wish to opt for (cumulative or non-cumulative)
  • Step 3: Choose the preferred tenor of the FD

And Voila! The accrued interest amount and the total amount earned at maturity will be automatically displayed on your screen.

The two different types of deposits available are:

Cumulative deposits

  • Interest is compounded annually and payable along with principal at the time of maturity
  • Suitable for individuals who don’t require periodic interest payouts

Non-cumulative deposits

  • Interest is payable on a monthly, quarterly, half-yearly, or annual basis
  • Convenient for those requiring a periodic interest payout

Factors determining maximum returns of your deposit

  • Principal amount (or deposit) – Higher deposit means higher interest
  • Deposit tenure – Longer tenures result in higher interest
  • Rate of interest – A higher percentage of interest rates yield greater interest amount
  • Type of deposit (Cumulative or non-cumulative) – Cumulative FDs fetch better interest
  • Frequency of interest – Interest can be compounded monthly, quarterly, half-yearly, or annually
  • Mode of investment – Along with an additional 0.50% for senior citizens, online investors less than 60 years of age are eligible for another 0.10% of interest

The RIGHT Way To Analyse & Calculate FD

As an investor, you need to go through a thorough analysis and research before investing in any scheme. A fixed deposit calculator tells you whether the investment scheme you’re choosing will fulfil your investment goals or not. This is how an FD calculator helps you with your investment decision:

  • You can compare various FD interest rates offered by different financial institutions before investing.
  • Fixed deposits offer a flexible tenure from 7 days to 10 years. You can adjust the calculator to determine which FD period will provide you with the desired goal.
  • Similarly, the compounding period of the fixed deposit can also be adjusted. Since fixed deposits pay compounded interest rates, you must know the compounding period best suited for you.

Fixed deposits are usually made with the primary motive of receiving interests. The rate of interest on an investors’ deposit depends on the tenure they choose and the frequency of interest payouts. The interest rate of FDs is fixed at the time of opening the deposit but independent of any fluctuations in the market.

Certain financial institutions even allow investors to break the FDs before maturity. An online FD calculator is a useful tool that determines the accrued interest and amount at the time of maturity.

The Advantages

Calculates and gives you the exact interest amount you’re eligible for

  • Online FD calculators are free for unlimited use by registered users
  • You’re able to compare the interest rates and maturity amount of different financial institutions without any hassle

Once you come to know the returns that your FD will fetch you on maturity, it’s your call whether you withdraw or reinvest that amount. Ample information regarding FD calculators is available on numerous platforms. Compare the returns from different websites and get yourself the best bet.