Key Takeaways
- Cumulative FDs use compound interest, not simple interest.
- More frequent compounding gives a slightly higher maturity value.
- Common compounding frequencies are quarterly, half-yearly, and yearly.
- The rate you enter should be the actual rate quoted by your bank.
The compound interest formula
For a cumulative FD, maturity value is:
M = P × (1 + r/n)n×t
where P is the principal, r is the annual rate (as a decimal), n is the number of compounding periods per year, and t is the term in years.
Why frequency matters
The more often interest is compounded, the sooner earned interest starts earning its own interest. Quarterly compounding therefore yields slightly more than annual compounding for the same rate. Many Indian banks compound FD interest quarterly, but you should confirm the frequency for your specific deposit.
A worked example
Enter your principal, the quoted rate, the term, and the compounding frequency into the FD calculator. It applies the formula above and shows the estimated interest and maturity value, plus a year-by-year growth table.
Sources
We reference primary and official sources. Rate- and rule-dependent details must be verified against the latest official information.
Related Calculators
Related Guides
Cumulative vs Non-Cumulative FD
A cumulative FD reinvests interest until maturity for a higher final value; a non-cumulative FD pays interest out periodically for regular income.
retirementHow Compound Interest Works
Compound interest is interest earned on both your principal and previously earned interest. Over time, and with more frequent compounding, it grows money faster than simple interest.
taxHow 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.
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.