Question 1

How is FD interest calculated in India?

Accepted Answer

FD interest is calculated using compound interest, typically compounded quarterly by most banks. The formula is: Maturity = Principal × (1 + r/n)^(n×t), where r is the annual rate, n is compounding frequency, and t is the tenure in years.

Question 2

What is the difference between cumulative and non-cumulative FD?

Accepted Answer

In a cumulative FD, interest is compounded and paid at maturity along with the principal. In a non-cumulative FD, interest is paid out at regular intervals (monthly, quarterly, or annually) while the principal is returned at maturity.

Question 3

Are FD returns taxable in India?

Accepted Answer

Yes, FD interest income is fully taxable as per your income tax slab. Banks deduct TDS at 10% if annual interest exceeds Rs. 40,000 (Rs. 50,000 for senior citizens). You can submit Form 15G/15H to avoid TDS if your total income is below the taxable limit.

Question 4

What is the penalty for breaking an FD early?

Accepted Answer

Most banks charge a penalty of 0.5% to 1% on the applicable interest rate for premature FD withdrawal. Some banks may apply the rate for the actual tenure held minus the penalty, which can significantly reduce your effective returns.

FD Calculator

FD Calculator