FD: 110,000 at 6% for 2 Years
A fixed deposit of 110,000 at 6% for 2 years matures to 123,914 with quarterly compounding. Interest: 13,914.
Maturity = 110,000 x (1 + 6/400)^(4 x 2) = 123,914. Interest earned = 13,914.
How This Was Calculated
Bank FDs compound quarterly:
Maturity = P x (1 + R/400)^(4 x Y)
Where P = deposit, R = annual rate, Y = years. The 400 divisor converts the annual rate to a quarterly rate (R/4 percent), and 4Y is the number of quarters.
Quarterly compounding earns slightly more than annual compounding at the same rate.
Frequently Asked Questions
How is FD interest calculated?
Most bank FDs compound quarterly: Maturity = P x (1 + R/400)^(4Y). Some banks offer simple-interest FDs for short tenures or monthly payout options.
Is FD interest taxable?
Yes. FD interest is added to your income and taxed at your slab rate. Banks deduct 10% TDS if annual interest exceeds 40,000 (50,000 for senior citizens). Submit Form 15G/15H if your income is below the taxable limit.
What happens if I break my FD early?
Banks charge a penalty of 0.5-1% on the applicable rate for the actual period held. Your effective return drops, so choose tenure carefully or ladder multiple FDs.
FD vs SIP: which is better?
FDs give guaranteed 6-7.5% returns with zero risk (insured up to 5 lakh per bank). Equity SIPs have historically returned 10-12% but with market risk. Many investors use both.
Do senior citizens get higher FD rates?
Yes, most banks offer 0.25-0.50% extra for depositors aged 60 and above, plus a higher TDS exemption threshold.