Today, there are a plethora of high-yielding investment options. Yet, fixed deposits have a stronghold in the marketplace. And why wouldn’t it? Fixed deposits come with guaranteed returns and a flexible tenor. The interest rate calculation can be done with the help of a fixed deposit calculator at the time of opening a fixed deposit account. The final amount in the fixed deposit can be withdrawn at the time of maturity.
What Is a Fixed Deposit Interest Calculator?
What really is a fixed deposit, a fixed deposit calculator, and how to use a fixed deposit interest calculator? A fixed deposit is a term investment category offered by NBFCs and banks. These fixed deposits typically offer a high rate of interest, subject to specific conditions and terms, which is why it is necessary to understand how the fixed deposit interest calculator works. The amount deposited in an FD is locked for a set period of time and can vary between the time of 7 days to 10 years. A fixed deposit calculator helps calculate the maturity amount for a deposit based on the prevailing interest rate for a certain period of time.
What is a Cumulative Fixed Deposit?
A cumulative fixed deposit accumulates the amount of interest until the time of maturity, wherein the interest rate is compounded every quarter of a year. This interest earned on an annual basis is an add-on to the principal amount, and you can pay it along with the principal amount by the end of your tenure.
What is Non-Cumulative Fixed Deposit?
A non-cumulative type of fixed deposit pays the accumulated rate of interest on a regular basis to an investor. Based on an investor’s choice, the rate of interest can be yearly, half-yearly, quarterly or monthly. It is essential to understand that interest rates vary for each of the payout options.
How Does a Fixed Deposit Interest Rate Calculator Work?
If you are wondering how to calculate the fixed deposit interest rate, here is a simple solution for you.
A fixed deposit interest calculator or simply a bank fixed deposit calculator is a tool that helps calculate interest earned on a fixed deposit. It utilizes the deposit amount, Fixed Deposit rate of interest and the tenure of the fixed deposit to calculate the maturity amount accurately.
To put it simply, the maturity amount is the amount you get at the end of a fixed deposit tenure. It consists of the total interest rate earned on the principal or deposit amount.
What is Simple Interest?
Simple interest is the interest you earn on a particular investment at a pre-decided interest rate for a certain period of time. It’s calculation can be done by multiplying of the principal amount, the rate of interest per year and the time span.
What is Compound Interest?
Compound interest is the interest you earn on the principal amount. Compound interest calculation is done by multiplying the interest rate with the principal amount with respect to the period in years for which the interest calculation is done.
What is Fixed Deposit Interest Calculation Formula?
- The formula for Simple Interest calculation:
“P x R x T/ 100 = SI”
Here,
SI stand for Simple Interest
P is the Principal amount (The investment amount)
R is the Rate of Interest in percentage (%)
T is the tenure, i.e., the time for which the deposit is kept in a Fixed Deposit account.
- The formula for calculation of Compound Interest:
“P (1+r/n) ^ (n * t) = A”
In this formula,
A is the Maturity Amount
P is the Principal amount
r represents the Rate of Interest
n is the number of compounding in a year
t is the number of years
What are Inputs for Using Fixed Deposit Calculator?
A Fixed Deposit calculator is a type of tool that calculates the amount one shall get through investments in a fixed deposit at maturity. This tool utilizes inputs like the amount of fixed deposit, the Fixed Deposit tenure and the prevailing rate of fixed deposit for a fixed tenure.
What are the Results from a Fixed Deposit Calculator?
A fixed deposit calculator works by calculating the maturity amount of the deposit based on the prevalent rate of interest for certain tenure. This calculator is simple to use and helps you compare varying interest rates from various banks, resulting in easy decision-making of which bank to choose, ensuring the highest maturity amount.
Benefits of Using Fixed Deposit Interest Calculator
The simplest answer to ‘how to calculate fixed deposit interest’ is a fixed deposit interest calculator that helps calculate the fixed deposit interest rate and comes with a number of benefits, insisting on its use. These are:
- While using a fixed deposit interest calculator, there are zero scopes of errors. high accuracy is also offered when it comes to the fixed deposit interest calculator. It is an automated calculator generating automated results.
- FD calculator helps zero in on the inconvenient calculations and turns out to be both time and cost-effective.
- The cumulative fixed deposit interest calculator is free of cost and can be used multiple times. It helps to compare returns for varying combinations of amount, FD rates and tenure.
Key Takeaways
- A fixed deposit is a type of term investment that offers a typically high-interest rate.
- A fixed deposit calculator assists in the calculation of the maturity amount for a fixed deposit based on the prevailing rate of interest.
- The financial institutions with the provision of fixed deposits consistently update the rate of interest given on fixed deposits according to the changes in the economy.
- The only details required for a fixed deposit interest calculator with the help of a fixed deposit rate calculator include the tenure of deposit, the deposit amount and the prevailing fixed deposit rate of interest.
Factors Affecting Fixed Deposit Interest Rates
Financial institutions and banks providing fixed deposits as an option of investment to consumers consider the following points:
- Period or tenure of the deposit
Tenure of the deposit is the time period for which the principal amount remains invested in a fixed deposit. This period varies and most commonly ranges from a week to a decade. Different terms fetch different interest rates on fixed deposits.
- Age of an applicant
Fixed deposits offer a preferential rate of interest to senior citizens and may range anywhere from 0.25 per cent to 0.75 per cent over the regular interest rate for consumers. The age limit can vary starting from 60 years and above and sometimes 55 years and above in the category of senior citizens.
- Current financial conditions of the applicant
The financial institutions providing fixed deposits consistently correct their rate of interest as per the changes that prevail in the economy. This includes the change in repo rate by the Reserve Bank of India and inflation as well.
Therefore, it is safe to say that prevailing financial conditions can potentially impact interest rates for fixed deposits.
Also Read: Senior Citizen Fixed Deposit Interest Rates
Conclusion
The fixed deposit interest calculator is extremely easy to use and helps compare different rates of interest and different tenures from banks, ultimately making it easier to decide which tenure gives the highest maturity amount for a fixed deposit.
FAQs
A fixed deposit return calculator or simply a fixed deposit calculator is a tool that calculates how much you will get on investing in a Fixed Deposit at the time of maturity. It is an efficient tool that utilizes inputs like the tenure of the fixed deposit, the deposit amount, and the overall fixed deposit rate for the suggested tenure.
The details required to use a fixed deposit rate calculator include the deposit amount, the tenure of deposit, and the prevailing fixed deposit interest rates calculator.
The figures provided by the fixed deposit interest calculator are the closest estimate. This is so because the rates may vary at the time of a real purchase (for example, in the case of a premature withdrawal).
Yes. The interest rate earned on a fixed deposit is taxable. However, according to Section 80C of the 1961 Income Tax Act, investors can claim deductions up to INR 1.5 Lakh every financial year.
Yes, it is mandatory to provide a PAN card when applying for a Fixed Deposit scheme.
A fixed deposit calculator aids financial planning as it helps save time on complex calculations. A FD calculator helps compare the maturity amount and FD interest rates offered by different banks. It helps you make an informed decision as you have all the necessary figures at your disposal.
Also Read: Fixed Deposit vs Mutual Fund on Investment Simplified
