Fixed Deposit Calculators: Reach Your Financial Goals With Accurate Numbers

Fixed deposits are one of the safest investment tools provided by various financial institutions. Typically offering a higher rate of interest, the amount invested in an FD is locked for a fixed tenure. Once the maturity period is complete, the principal amount can be withdrawn along with the interest accrued for the given tenure.

At the time of opening a fixed deposit account, the interest rate is independent of any market fluctuations. Some financial institutions also have a provision of prematurely breaking the FD if you’re faced with a cash crisis. However, premature withdrawal requires a certain amount of penalty fee to be paid. The interest amount to be paid at the time of maturity is calculated by using a fixed deposit calculator. This easy-to-use tool simplifies the interest calculation process significantly.

What does a fixed deposit calculator do?

Typically, a fixed deposit calculator calculates the maturity value of the amount invested. Since the interest rate on an FD differs according to the tenures, this calculator calculates the amount of interest as per the prevailing rates. A fixed deposit calculator lets you know the returns on your invested amount based on the following factors:

Amount deposited

This is the initial principal amount that you invest while opening the FD account. This amount differs from one financial institution to another and can be as low as Rs. 100 or Rs. 500.

Interest rate

There are no fixed rates of interest for FDs. Depending upon the tenure for which you lock in your invested amount, fixed deposit interest rates keep varying. These rates are generally higher for senior citizens.

Deposit tenure

The maturity value of your fixed deposit depends on the period for which you invest. FD tenures range from as low as 7 days up to a maximum of 10 years.

Interest compound frequency

When you invest in an FD, it’s upon you whether you want to receive the interest monthly, quarterly, half-yearly, or annually. The fixed deposit calculator calculates the interest amount depending upon the frequency of interest amount payout. Along with calculating the interest amount, a fixed deposit calculator also aids you with the calculation of the maturity value of your invested amount.

Steps to calculate interest with fixed deposit calculators

Return on fixed deposits’ calculation might initially seem tedious but with the technological advent, calculating returns on FDs is now just a matter of few minutes. Follow these 3 simple steps 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, that’s all! The accrued interest amount and the total amount earned at maturity will be automatically displayed on your screen.

Types of deposits for calculating interest

Cumulative interest payout

This deposit gives you the benefit of compounding, i.e., earning interest on interest. The higher the compounding frequency, the higher will be the amount of interest you earn on your FDs.

Periodic interest payout

Under this FD scheme, you receive a fixed interest amount at the end of every period (a month, a quarter, 6 months or a year). Here, the interest is calculated according to the simple interest terms. This is why the interest amount received is constant through the tenure of the fixed deposit. At the end of the maturity period, the entire principal amount is paid back.

Methods of calculating interest

While calculating the interest on fixed deposits, the method of calculation depends upon the kind of investment made. While a periodic interest payout calculates interest by the simple interest method, the cumulative interest payout gives you compounded interest. Simple interest is earned on the principal amount invested and at the predetermined rate prevailing during the investment tenure. Compound interest refers to the interest earned on the principal amount invested and the interest earned.

Income Tax calculation on fixed deposit interest

Since the interest on fixed deposits is a form of income, you have to pay taxes for the same. Interest income from FDs is taxed according to the tax rate applicable to the FD account holder. The notable factor here is that the interest on deposits is taxed on an accrual basis and not on a receipt basis. Say, you placed a cumulative deposit with a financial institution for 5 years. Even though you’ll receive the entire interest amount at the end of the fifth year, you’ll have to pay tax on the accrued interest for each year in that year itself. This calculation can be easily carried out using a fixed deposit calculator.

Calculation of TDS (Tax Deducted at Source) on fixed deposit interest

TDS is a form of deduction applicable for FDs. If the earned interest amount crosses the pre-set limit, TDS is deducted from this amount. Financial institutions deduct this amount before paying it to the customers. As per the Income Tax Act of 1961, the TDS amount is deducted on the interest earned on FDs only if they fall under the taxable category.

When an interest amount exceeds Rs. 40,000 in a financial year, banks deduct a TDS on the FD interest.  The current rate of TDS stands at 7.5%. If an investor doesn’t have a PAN card, this rate of TDS goes up to 20%. Despite the prevailing standard rate, this TDS rate on interest may vary with the residential status of citizens. A fixed deposit calculator spares you the time and effort required for making tedious manual calculations like these.

How can you reduce or save tax on FDs?

• Invest at the correct time
• Submit all relevant forms
• Diversify your investment among different financial institutions rather than investing in a single FD

Why use fixed deposit calculators?

• To save your time and effort on calculations
• To perform complex calculations without any error
• To calculate the exact interest amount you’re eligible for
• To compute quick and accurate results irrespective of the unit of currency
• For registered users to free and unlimited get access to online fixed deposit calculators
• To compare the interest rates and maturity amount of different financial institutions without any hassle

Technological advancements have emerged as a game-changer when it comes to calculating the interest amount on FDs. Fixed deposit calculators ease out the interest calculation process for you and save your time & energy. Multiple online platforms have a plethora of knowledge about FD interest calculation with fixed deposit calculators. Explore a variety of the platforms available across the internet and compare the interest amount calculated by different fixed interest calculators before you reach your final decision.