FD and interest payout
Compare taking the interest out each period with leaving it in to earn more.
Banks often pay a slightly lower rate on monthly payout FDs. TDS is deducted if the year's interest crosses the limit, so the amount you receive can be lower.
About this calculator
How fixed deposit interest is calculated
Indian banks normally compound cumulative fixed deposits quarterly. Interest is worked out each quarter on the balance including interest already added, so the effective yearly return is slightly higher than the rate on the certificate. A deposit quoted at 8% compounded quarterly actually returns about 8.24% over a year.
A payout deposit works differently. The interest is paid out monthly, quarterly or yearly instead of staying in the account, so there is nothing extra to compound and you receive simple interest. Banks often quote a slightly lower rate on monthly payout deposits for this reason. This page shows both, and what the difference is worth over your tenure.
Tax, and what you actually receive
Fixed deposit interest is fully taxable. It is added to your income and taxed at your slab rate, and the bank deducts TDS once the interest it pays you in a financial year crosses the threshold. TDS is not an extra tax, it is an advance against what you owe, and you settle the balance when you file your return.
This matters when comparing an FD against anything else. Someone in the 30% bracket keeps roughly 70% of the interest, so a 7.5% deposit nets about 5.25%. Compare that figure, not the headline rate, against a loan you could repay instead.
Breaking a deposit early
Withdrawing before maturity usually means the bank pays the rate that applied for the period the money actually stayed, minus a penalty of around 0.5% to 1%. Splitting a large amount across several smaller deposits lets you break only what you need and leave the rest earning.
Common questions
How often is FD interest compounded?
Most Indian banks compound cumulative deposits quarterly. Payout deposits do not compound at all, because the interest leaves the account each period.
Is FD interest taxable?
Yes, in full. It is added to your income and taxed at your slab rate, and the bank deducts TDS once the interest crosses the threshold for the financial year. Submitting Form 15G or 15H can stop the deduction if your total income is below the taxable limit.
What happens if I break an FD early?
The bank usually pays the rate applicable to the period the deposit actually ran, less a penalty of roughly 0.5% to 1%, so you earn less than the contracted rate.
Are fixed deposits safe?
Deposits with scheduled banks are insured by the DICGC up to ₹5 lakh per depositor per bank, covering principal and interest together. Company deposits are not covered by that scheme and carry the issuer's credit risk.