How is Interest on Fixed Deposits Calculated by Banks?
14 Apr 2023
Table of Content
A fixed deposit (FD) is one of the safest investment instruments banks offer customers. It allows customers to invest a certain amount of money for a fixed period safely and securely. However, you may be interested in finding out how to calculate your fixed deposit interest rate. Well, you can use a fixed deposit calculator online for this purpose.
The rate of interest is predetermined by the financial institution and varies between banks. You can open an FD with a minimum of Rs 1,000 and for a minimum of seven days.
The upper limit of both amount and tenure varies from one bank to another. FDs are preferred by investors as they offer a higher yield than a saving account.
An FD is one of the most favored investments for senior citizens who use the monthly income payout in their retirement years. It is also possible to get loans against FDs.
Key Features of FD
An FD offers high returns on investment with zero risk. There are several other attractive features of FDs , such as:
Fixed deposit under the savings scheme offers tax exemption of up to Rs 1.5 lakh in a financial year under Section 80C of the Income Tax Act.
Senior citizens are offered an additional 0.50% interest on most FD plans. You can calculate interest on FD for senior citizens with an online calculator.
Fixed deposits also offer a premature withdrawal facility, allowing customers to withdraw funds before the end of the lock-in period by paying a FD premature withdrawal fee wherein penalty depends on Bank to Bank. Investors can use a fixed deposit maturity calculator to work out the details.
How to use an FD Interest Calculator?
To use a fixed deposit interest rate calculator, keep all related data, such as the amount to be invested and the period ready. Then, enter all required data at their specified spots and click on “calculate” to get the maturity amount.
Banks offer a fixed deposit calculator , which allows customers to calculate the final amount they will receive at the end of the tenure (subject to TDS).
The FD calculation formula helps you calculate the maturity amount based on the investment amount, interest rate, and tenure. The amount invested in a fixed deposit gets locked for the period it has been deposited. You can calculate FD interest online for the tenure you choose.
How Does an FD Interest Calculator Work?
With a fixed deposit calculator, two types of fixed deposits can be calculated. If you don’t know how to calculate FD interest, you can use the online FD calculator at your lender’s site.
Simple Interest
Using simple interest is an easy method to calculate interest on FD.
Simple Interest is calculated using the FD calculation formula:
Fixed Deposit Maturity Amount = Principal Amount + (Principal *Rate of Interest* Time Period)/ 100}
Compound Interest
Using compound interest fixed deposit, interest can be earned on the principal amount and additional interest on the interest amount. However, it is important to ensure that the interest rate is good to get good returns on your investment.
Compound interest is calculated using this formula:
A = P(1 + r/n)^nt
A stands for the amount of money that has accumulated.
P is the principal; that's the amount you start with.
The r is the interest rate. This is a decimal; in other words, if the interest rate is 9%, we use .09 in the equation.
The n is the number of times the interest compounds each year.
Finally, t is the time in years of the deposit or borrowed money.
Advantages of Bank of Baroda’s Fixed Deposit Calculator
Bank of Baroda offers various types of fixed deposits . On the Bank of Baroda website, you can find the FD Calculator, which is easy to use and helps compare interest rates to earn maximum returns. With this online tool, you needn’t worry about how to calculate FD interest and will get the calculations in a jiffy.
Use Bank of Baroda’s Fixed Deposit Calculator to know the exact maturity amount to help in future investment planning. It allows you to compare different fixed deposit schemes to avail of the maximum returns. It also saves the time and effort required to solve these complex calculations. So, don’t split hairs on how to calculate the fixed deposit interest rate. Make an informed decision with Bank of Baroda’s Fixed Deposit Calculator—it’s free and can be used limitlessly!
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The contents of this article/infographic/picture/video are meant solely for information purposes and do not necessarily reflect the views of Bank of Baroda. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Bank of Baroda and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Bank of Baroda or its affiliates to any licensing or registration requirements. Bank of Baroda shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
TDS on Fixed Deposit Interest
When one receives a payment, the person making the payment must deduct tax before paying. The tax thus deducted is called tax deducted at source (TDS), which the payee has to pay to the central government.
How To Open A Fixed Deposit Account
Time deposits or Term deposits are most commonly known as fixed deposits. Apart from mobilising funds from demand deposits like savings and current accounts, banks also resort to fixed deposits to raise funds. Fixed deposit, like the word suggests, have a fixed duration.
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