Key Takeaways
- Cumulative FDs compound interest and pay everything at maturity.
- Non-cumulative FDs pay interest at regular intervals.
- Cumulative usually yields a higher maturity value.
- Choose based on whether you need income now or growth later.
On this page
Cumulative FD
In a cumulative FD, the interest earned is not paid out; it is added back and earns further interest. You receive the full principal plus accumulated interest at maturity. Because of compounding, this option generally gives the highest maturity value.
Non-cumulative FD
A non-cumulative FD pays interest at chosen intervals — monthly, quarterly, half-yearly, or yearly. It suits people who want a regular income stream from their deposit, such as retirees, but the total interest is typically a little lower because payouts are not reinvested.
How to choose
- Need regular income now → non-cumulative.
- Want maximum growth and do not need interim payouts → cumulative.
The FD calculator models the cumulative case; reduce the compounding frequency to see how payout timing changes the outcome.
Sources
We reference primary and official sources. Rate- and rule-dependent details must be verified against the latest official information.
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How Is Interest on FDs and RDs Taxed?
Interest earned on fixed deposits and recurring deposits is fully taxable as 'income from other sources' at your slab rate. Banks may deduct TDS above thresholds, but you owe tax on the interest either way. The post-tax return is what to compare against alternatives.
bankingHow Is FD Interest Calculated?
FD interest is calculated using compound interest. The maturity value depends on the principal, the interest rate, the term, and how often interest is compounded.
bankingWhat Is a Fixed Deposit?
A fixed deposit is a deposit placed with a bank for a fixed term at an interest rate agreed at the time of booking, offering predictable returns and high capital stability.