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The Easiest Way to Calculate Fixed Deposit Interest Rates

Fixed Deposit Account

A fixed deposit account is a kind of savings account. It differs from other saving accounts with its higher rate of interest. Yes, the maturity value of a fixed deposit account is higher than many other savings accounts. Though people find it interesting, they are not knowledgeable enough to calculate the fixed deposit interest. As they find it difficult to understand, they stay away from this profitable investment.

How to calculate fixed deposit interest?

It is one of the main questions that arise in the minds of the customers. FD calculation formula, which means the Fixed Deposit calculation formula helps that. The rate of interest and frequency of interest payouts determine the maturity value and interest.

Let,     A = maturity value

P = principal amount or deposit amount

n = compound interest frequency

r = rate of interest

t = tenure / time period

Now, the formula is,

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

or

A = P x (1+r/n)nt

The formula may seem a little hard, but it is not as hard as we think. It is as simple as a simple interest formula. It’s time to calculate.

Let,    P = Rs. 25000

(Principal / Deposit Amount)

r = 7% = 7/100 = 0.07

(rate of interest – let us take it as 7% for most of the banks’ rate of interest is around 7%)

t = 3

(tenure / time period – 3 years)

n = 4

(compound interest – quarterly – 4 times per annum)

Now,

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

A = 25000*(1+0.07/4)^(4*3)

A = 25000*(1+0.0175)^12

A = 25000*(1.0175)^12

A = 25000*1.23143931494

A = 30785.98

In order to find the interest amount, lets reduce the deposit amount from maturity value.

I = A – P

I = 30785.98 – 25000

I = 5785.98

If a person deposits Rs. 25000 in a bank, for a 7% rate of interest and quarterly compound interest frequency, by the end of 3rd year the person will receive Rs. 5785.98 as interest.

Calculate Fixed Deposit Considering Tax

There are two types of fixed deposits. They are regular fixed deposit and tax saver fixed deposit. One must be careful in the selection of savings account and calculate following that. It will give a greater percentage of profit comparatively.

Regular Fixed Deposit is for a fixed period of 6 months to 5 years. One can withdraw amount, only after the maturity date or else it will end in loss.

Tax Saver Fixed Deposit is a rare one. Section 80C of the Income Tax Act, 1961, says that there are tax exemption on the interest obtained (but conditions applied).

Tax Deduction at Source (TDS)

It is the concept of accruing tax from the source of income itself. In India, TDS rates range from 0 to 30 percentage.

For Resident Indians TDS is 10%

For non – resident Indians TDS is 30%

For non – resident externals TDS is 0%

For resident Indians, whose income per annum is less than Rs. 2.5 Lakh, TDS is 10%. But they should submit 15G/15H form to the bank.

For senior citizens, who deposit less than Rs.50,000, TDS is 0%, says Section 80 TTB.

Hence the customer should be aware of tax deduction while depositing money. It is an important factor that affects the interest. One should calculate considering the tax deduction rate.

All bank FD rates

Here are the fixed deposit interest rates of some top banks in India.

S.No. Name of the Bank Rate of Interest
Senior Citizen Regular Citizen
1 ICICI Bank 7.50 7.00
2 State Bank of India 7.30 6.80
3 Bank of Baroda 6.95 6.45
4 Punjab National Bank 7.25 6.75
5 HDFC Bank 7.80 7.30
6 Canara Bank 7.00 6.50
7 Union Bank of India 7.25 6.75
8 Bank of India 7.15 6.65
9 Indian Bank 7.25 6.75
10 Indian Overseas Bank 6.75 6.25
11 Axis Bank 7.50 7.00
12 Yes Bank 7.75 7.25
13 Kotak Mahindra Bank 7.00 6.50
14 IndusInd Bank 8.00 7.50
15 DCB Bank 7.75 8.25
16 City Union Bank 7.50 7.00

 

Some small banks provide a higher rate of interest too. They range from 8.00% to 9.00%. Banks like Fincare Small Finance Bank, Equitas Small Finance Bank, ESAF Small Finance Bank, Jana Small Finance Bank, Ujjivan Small Finance Bank, etc., give such interest.

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