Do Indian banks compound FDs quarterly?

Yes, most banks compound cumulative fixed deposits every quarter. Non-cumulative FDs pay the interest out instead of compounding it.

What is the effective yield?

The annual return after compounding. 7% compounded quarterly is about 7.186% a year, which lets you compare deposits with different compounding.

Is FD interest taxable?

Yes. It is taxed as income at your slab rate, and banks deduct TDS once interest crosses the threshold set by the Income Tax Department.

Bank deposits in India are insured by DICGC up to ₹5 lakh per depositor per bank, covering principal and interest together.

Can I withdraw an FD early?

Usually yes, but banks reduce the interest rate for premature withdrawal. Tax-saving FDs have a five-year lock-in and cannot be broken early.

Financial · Free tool

FD Calculator

Fixed deposit maturity value and interest, with quarterly or monthly compounding.

A fixed deposit (FD), also called a term deposit, locks a sum with a bank for a set period at a fixed rate. For a cumulative FD the interest is not paid out — it is added to the deposit and earns interest itself, so the maturity value depends on how often the bank compounds. Most Indian banks compound cumulative FDs quarterly, which is why the effective yield is a little higher than the headline rate.

This FD calculator turns the amount, the annual rate and the tenure in months into the maturity value, the interest earned and the effective annual yield. Choose the compounding frequency your bank uses — quarterly is the default because it is the common convention in India — and compare tenures or banks before you book.

Results are before tax. FD interest is taxable as income, and the bank may deduct TDS when interest crosses the threshold set by the Income Tax Department, so your cash in hand can be lower than the figure shown.

By DailyCalc Editorial Team · Updated 2026-10-03 · 6-min read · 3 sources cited

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FD maturity formula (compound interest)

A = P × (1 + r ÷ n)^(n × t)

The deposit P grows at the annual rate r, compounded n times a year, for t years. Interest earned is A − P. The effective annual yield (1 + r/n)ⁿ − 1 shows what the deposit really earns per year once compounding is included, which makes deposits with different compounding frequencies comparable.

P: Principal — the amount you deposit.
r: Annual interest rate as a decimal (7% → 0.07).
n: Compounding periods per year: 4 for quarterly, 12 for monthly, 1 for yearly.
t: Tenure in years. The calculator takes months, so 36 months = 3 years.

Worked example: ₹1,00,000 at 7% for 3 years, compounded quarterly

A cumulative FD booked at a bank that compounds every quarter:

Quarterly rate = 0.07 ÷ 4 = 0.0175; number of quarters = 4 × 3 = 12.
Growth factor = (1.0175)¹² ≈ 1.231439.
Maturity = 1,00,000 × 1.231439 ≈ ₹1,23,143.93.
Interest earned = 1,23,143.93 − 1,00,000 = ₹23,143.93.
Effective yield = (1.0175)⁴ − 1 ≈ 7.186% a year — slightly above the 7% headline rate.
Same deposit compounded yearly gives ₹1,22,504.30; monthly gives ₹1,23,292.56.

Result: ₹1,00,000 at 7% for 36 months (quarterly) matures at ₹1,23,143.93 — ₹23,143.93 interest, 7.186% effective yield.

How to use this FD calculator

Enter the terms exactly as the bank quotes them.

Step 1: Enter the deposit amount

The principal you will lock in.

Step 2: Enter the annual rate

The card rate for your tenure. Senior citizens often get an extra 0.25–0.50%; enter the rate that applies to you.

Step 3: Enter tenure in months

From 1 to 360 months. Banks quote tenures in days or months; 1 year = 12 months.

Step 4: Pick the compounding frequency

Quarterly for most Indian bank cumulative FDs. Check your bank's terms if unsure.

When to use it

Common decisions an FD calculation settles:

Comparing banks

A small rate difference on a large deposit is real money: ₹5,00,000 at 7.25% for 5 years compounds to about ₹7,16,130 — check the competing rate the same way.

Choosing a tenure

Rates differ by tenure bucket. Run each bucket to see whether a longer lock-in is worth the higher rate.

Laddering

Split a sum into several FDs maturing in different years so some money becomes available every year without breaking a deposit.

Emergency fund planning

Short FDs can hold part of an emergency fund. Remember premature withdrawal usually costs a penalty on the rate.

FD vs RD vs SIP

Use alongside our RD and SIP calculators to compare a lump sum deposit with monthly saving or investing.

Pro tips

Get more from a fixed deposit:

Compare effective yields, not headline rates, when compounding frequencies differ.
Submit Form 15G or 15H if eligible and your total income is below the taxable limit, to avoid unnecessary TDS.
Deposits are insured by DICGC up to ₹5 lakh per depositor per bank, including interest — spread larger sums across banks.
Use auto-renewal carefully: it renews at the rate on the maturity date, which may be lower.
For regular income, a non-cumulative FD pays interest monthly or quarterly instead of compounding it.

Common mistakes

Where FD expectations go wrong:

Ignoring tax

FD interest is added to your income and taxed at your slab rate. A 7% FD in a 30% bracket earns about 4.9% after tax.

Assuming compounding on short deposits

Many banks pay simple interest on deposits shorter than six months, so the compounding result can slightly overstate very short FDs.

Breaking early

Premature withdrawal typically reduces the rate by 0.5–1% for the whole period held. Ladder deposits instead of putting everything in one.

Forgetting inflation

If inflation is 5% and your post-tax FD yield is 5%, your money is only keeping pace — not growing in real terms.

Sources & references

The formula, thresholds and guidance on this page were checked against these primary sources. Written and reviewed by DailyCalc Editorial Team; last updated 2026-10-03. Spotted an error? Tell us.

Disclaimer: Illustrative only — not financial advice. Banks may round interest differently, pay simple interest on short tenures, and deduct TDS. Confirm the maturity value on your deposit receipt or the bank's own calculator.

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