Everything You Need to Know About FD Rate Calculator

Fixed Deposit Calculator

Fixed deposits are considered one of the most efficient investment tools in India as they offer security as well as substantially high returns. As FDs are not to market-linked, the principal amount is guaranteed to increase over time.

Another major advantage of investing in fixed deposit accounts is that they are insured under government regulations. According to government norms, every fixed deposit investment is insured up to a sum of Rs.1 lakh, making it one of the safest of investment options in the current financial market of India.

Worth mentioning, potential investors should also check the tax benefits available on fixed deposit investments. There are quite a few exceptions which are offered under the Income Tax Act, including exemptions up to Rs.1.5 lakh per annum if an individual invests in a fixed deposit account.

Individuals can open fixed deposit accounts at almost every public and private financial institution available across India.

By comparing the interest rates offered by several financial institutions with the help of a fixed deposit calculator, you can select the one providing the highest returns.

What is FD Rate Calculator?

Fixed deposit calculators are online tools by the help of which investors can make an estimate of the gains generated from the interest rate provided by the financer. With the help of such a calculator, account holders can accurately determine their potential returns on investment.

Important factors for fixed deposit rate calculation

To determine the income generated from fixed deposit interest rates, the online calculator relies on the following factors to compute the results –

• Deposited amount

The interest of your FD is calculated based on the amount deposited in your fixed deposit account. So, you are required to provide information on the deposited amount while accessing an online fixed deposit calculator else the calculator will be unable to estimate the maturity amount and the total interest income generated.

• Type of account holder

The rates of interest offered by financial institutions on fixed deposit accounts depend on the type of account holder. Interest rates offered may vary according to –

1. New customers.
2. Existing customers.
3. Account-holders who are a senior citizen.
4. NRI and POI customers.
5. An employee of the particular financial institution.

• Investment tenor of the fixed deposit account

The number of months or years for which you are depositing funds in your fixed deposit account plays a major role in the calculation of the maturity amount. Usually, longer the investment tenor of your fixed deposit account, higher will be the interest rate offered by your financial institution.

Fixed Deposit Calculator Formula

Your fixed deposit calculator can be divided into two parts, cumulative and non-cumulative FD interest rates.

• For cumulative FD rates

In case of cumulative FD rates, calculation of interest is done annually and account-holders are not allowed to withdraw before maturity. The formula to calculate the maturity amount of a cumulative fixed deposit interest is..

A = P (1 + r/n) ^(n*t)

Here, ‘A’ denotes the maturity amount and ‘P’ indicates the principal amount. ‘r’  stands for the applicable interest rate and ‘n’ means the number of times the interest is compounded throughout the tenor of investment which is denoted by ‘t’.

Hence, net interest earned = A – P.

• For non-cumulative FD rates

In case of non-cumulative FD interest rates, calculation of interest is done periodically. Account-holders can choose to withdraw the interest amount of their fixed deposit account annually, semi-annually, monthly, quarterly, etc. The formula to calculate interest income from a non-cumulative fixed deposit is..

I = P*r*t/100

In this formula, ‘I’ indicates the total interest amount earned from your fixed deposit account during the tenor of investment which is ‘t’. The principal amount of your FD is denoted as ‘P’ and the interest rate offered by your financial institution is ‘r’.

In Last…

Hence, from the above methods, you get to understand how a fixed deposit calculator works. Several financial institutions and reputed NBFCs in India have such an online tool on their web portal. So, streamline your financial plan with the help of online calculator and earn higher returns by investing in any company fixed deposit plan. This will help you to save tax up to Rs.1.5 lakh per annum.