Last updated: 2026-10-21
How FD interest is calculated
Most Indian banks compound fixed deposit interest every quarter:
A = P × (1 + r ÷ n)n × t
- P = deposit amount
- r = yearly interest rate (as a decimal)
- n = times compounded a year (4 for quarterly)
- t = years
Example: ₹1 lakh at 7% for 5 years, compounded quarterly, becomes about ₹1,41,478. That's ₹41,478 in interest.
Tax on FD interest
- FD interest is added to your income and taxed at your slab rate.
- Banks deduct 10% TDS if your interest from one bank is over ₹50,000 a year (₹1 lakh for senior citizens). Without a PAN, TDS is 20%.
- If your total income is below the taxable limit, submit Form 15G (or 15H if you're 60+) to stop TDS.
- A 5-year tax-saver FD qualifies for 80C in the old regime, but you can't withdraw early.
Frequently asked questions
Is FD interest compounded monthly or quarterly?
Most banks compound cumulative FDs quarterly. Some small finance banks and NBFCs compound monthly. Check with your bank and pick the matching option above.
Can I break my FD early?
Yes, for most FDs (except tax-saver FDs). Banks usually charge a penalty of 0.5–1% on the interest rate for the time the deposit actually stayed.
Is my FD safe?
Deposits in a bank are insured by DICGC up to ₹5 lakh per person per bank, including interest. Company FDs aren't covered.
FD or debt mutual fund?
FDs give a fixed, known return. Debt funds can earn a little more but aren't guaranteed. Since April 2023, debt fund gains are also taxed at your slab rate, so FDs are often simpler.
Try the recurring deposit calculator.