How do Indian banks calculate Fixed Deposit (FD) maturity?

Indian cumulative FDs compound quarterly according to the formula A = P * (1 + r/4)^(4*t), where P is principal, r is annual interest rate in decimal, and t is tenure in years.

When is 10% TDS deducted on FD interest in India?

Under Section 194A, banks deduct 10% TDS if your total FD interest across all branches of a bank exceeds Rs 40,000 in a financial year (Rs 50,000 for Senior Citizens aged 60+).

FD Calculator India — Quarterly Compounding & Section 194A TDS

Deposit Principal (P)

₹

Interest Rate (p.a.)

Tenure (Years)

Yrs

Guaranteed Maturity Value (A)

₹7.16 L

₹7,16,131 • Effective Annual Yield: 7.45%

Principal Invested

₹5.00 L

₹5,00,000

Total Interest Earned

₹2.16 L

₹2,16,131

Avg Annual Interest

₹43,226

TDS Applicable (> ₹40K/FY)

Principal vs Interest Split

Quarterly Compounding Curve

📋 Section 194A TDS & Tax Note

Year-Wise FD Compounding Schedule

Year	Opening Balance	Interest Earned in Year	Cumulative Interest	Closing Maturity Balance

The Exact Indian Bank FD Formula (With Worked Example)

Under Reserve Bank of India (RBI) master directions, cumulative Fixed Deposits in Indian banks compound every quarter (every 3 months). That means your interest earns interest 4 times a year:

A = P × (1 + r / 4)^{4 × t}

Worked Example

Deposit P = ₹5,00,000 at r = 7.25% p.a. (0.0725) for t = 5 years (20 quarters):

1. Quarterly rate = 0.0725 / 4 = 0.018125
2. (1.018125)²⁰ = 1.432261
3. A = 5,00,000 × 1.432261 = ₹7,16,131

Practical FD Tips for Indian Depositors

FD Laddering: Instead of locking ₹10 Lakh in a single FD, split it into four ₹2.5 Lakh FDs maturing at 1, 2, 3, and 4 years so you never pay premature-withdrawal penalties during emergencies.
DICGC ₹5 Lakh Safety Cap: Deposit insurance covers up to ₹5,00,000 (principal + interest combined) per depositor per bank. Spread larger sums across 2–3 banks.
Submit Form 15G / 15H in April: If your total taxable income is below the basic exemption limit, file Form 15G (15H for seniors) at the start of the financial year to prevent 10% TDS deduction.

FD Frequently Asked Questions

No. Banks deduct 10% TDS under Section 194A only as an advance collection when annual interest crosses ₹40,000 (₹50,000 for Senior Citizens). If you are in the 20% or 30% income tax slab, you must pay the differential self-assessment tax when filing your ITR.

Because interest is credited every quarter and immediately starts earning interest in the next quarter. A 7.25% nominal rate compounded quarterly produces an effective annual yield of (1 + 0.0725/4)^4 - 1 = 7.45%.

Fixed Deposit (FD) Calculator