How do banks calculate FD interest in India?

Cumulative FDs at every scheduled bank compound quarterly. ₹5,00,000 at 7% for five years matures at ₹7,07,389 with quarterly compounding, against ₹7,01,276 if it were compounded annually, a gap of ₹6,113. Payout FDs pay simple interest each quarter or month instead, and the monthly option is paid at a slightly discounted rate.

What is the TDS limit on FD interest for FY 2025-26?

A bank deducts 10% TDS once the interest it pays you in the year crosses ₹50,000, or ₹1,00,000 for a senior citizen; both limits were raised in Budget 2025. The limit is per bank across all your deposits there. TDS is not the final tax: interest is taxable at your slab rate, so a 30% slab depositor owes 20% more at filing.

When should I submit Form 15G or 15H?

When your total income for the year is below the basic exemption limit, so no tax is due and TDS would only be refunded later. Form 15G is for depositors under 60, 15H for senior citizens. Submit it to each bank every April, before the first interest credit of the financial year, or the deduction will already have happened.

How much do I lose if I break an FD early?

You get the rate the bank offered for the period the deposit actually ran, not the rate you booked, less a penalty of 0.5 to 1 percentage point. SBI charges 0.50% up to ₹5 lakh and 1% above; most private banks charge 1%. Splitting a large deposit into several smaller FDs means you only ever break the one you need.

Is an FD in a small finance bank safe?

Up to ₹5 lakh per depositor per bank, yes: DICGC insures principal and interest to that limit at every RBI-licensed bank, small finance banks included. Above ₹5 lakh you are taking real risk for the extra rate. Spreading deposits across banks, or across family members at one bank, raises the insured total.

Does the senior citizen rate apply automatically?

Only if the bank has your date of birth on record and you book the FD as a senior citizen; many branches need you to select it at booking. The extra 0.50% is worth ₹17,585 over five years on ₹5 lakh at 7%. Super senior citizens over 80 get a further 0.25% at some banks, and schemes like SBI WeCare pay more on long tenures.

FD Calculator: Fixed Deposit Maturity and Interest

Filling in the four boxes

Deposit amount and tenure are obvious. The rate is the one on the bank’s rate card for that exact tenure bucket, and the buckets are odd: SBI’s card has a different rate for “1 year to less than 2 years” than for “2 years to less than 3 years”, and the special tenures like 400 or 444 days that banks push around festival season sit outside the buckets entirely. Read the row for your tenure, not the headline number in the advertisement.

Leave compounding on quarterly. Every scheduled commercial bank in India compounds a cumulative FD at quarterly rests. The other options exist for comparing against a corporate FD or an NBFC deposit (Bajaj Finance and Shriram, for instance, offer monthly, quarterly, half-yearly and annual options on their deposits) or for checking somebody else’s calculator.

Senior citizen adds 0.50% to the rate, which is what almost every bank gives anyone 60 or over. A few banks give super senior citizens (80 and over) a further 0.25%, and some run special schemes like SBI WeCare that pay more on longer tenures. In those cases type the total rate yourself and leave the toggle off.

Quarterly compounding and the ₹5 lakh example

M = P × (1 + r/n)^(n × t)

P is the deposit
r is the annual rate as a decimal
n is compounding periods a year (4 for quarterly)
t is the tenure in years

The default is ₹5,00,000 at 7% for 5 years. Quarterly rate 1.75%, 20 quarters:

M = 5,00,000 × (1.0175)^20 = 5,00,000 × 1.414778 = 7,07,389


Maturity value	₹7,07,389
Interest earned	₹2,07,389
Rate applied	7.00%
Effective annual yield	7.19%

What the compounding frequency is worth

Compounding	Maturity	Interest	Effective yield
Annually	₹7,01,276	₹2,01,276	7.00%
Half-yearly	₹7,05,299	₹2,05,299	7.12%
Quarterly	₹7,07,389	₹2,07,389	7.19%
Monthly	₹7,08,813	₹2,08,813	7.23%

Quarterly against annual is ₹6,113 on this deposit. The effective yield column is the one for comparing offers: a bank quoting 7.1% with annual compounding (₹7,04,559 at maturity) is paying you less than one quoting 7% compounded quarterly, and some NBFC brochures print the annualised yield in large type and the base rate in small type for exactly this reason.

The senior citizen version

Same deposit, same tenure, toggle on: rate applied 7.50%, maturity ₹7,24,974, interest ₹2,24,974, effective yield 7.71%. Half a percent is ₹17,585 over five years on ₹5 lakh, which is why parents’ money tends to sit in FDs in their own names.

Your bank’s own figure may differ by a few rupees. Banks count the tenure in days and compound on quarters from the deposit date, so a leap year or a deposit booked on the 31st shifts the maturity slightly. If the FD advice differs from this page by under ₹50, that is why. If it differs by thousands, the bank has used a different rate bucket or a payout option.

TDS, Form 15G/15H and what you actually keep

FD interest is income from other sources, taxed at your slab rate, and taxed in the year it accrues, not when the FD matures. A five-year cumulative FD is reported in five ITRs, and the bank’s interest certificate and your AIS will show it that way whether you like it or not.

For FY 2025-26 the bank deducts TDS at 10% under Section 194A once the interest it pays you in the year crosses ₹50,000, or ₹1,00,000 if you are a senior citizen. Both limits went up in Budget 2025 (from ₹40,000 and ₹50,000), and a lot of pages and a few bank staff still quote the old numbers. The limit is per bank, all branches combined, not per deposit. Without a PAN on file the rate is 20%.

On the default ₹5 lakh deposit, the interest in any one year runs from ₹35,930 in the first year to ₹47,424 in the fifth, so this FD on its own never triggers TDS for a regular depositor. Add a second FD at the same bank and it will.

TDS is not the tax. In the 30% slab you owe the remaining 20% at filing, and 7% before tax is 4.9% after it. If your total income is under the basic exemption limit, file Form 15G (15H if you are 60 or over) with the bank every April and it will not deduct at all. Getting TDS refunded after the fact means waiting for the ITR to process; the form is quicker.

Breaking the FD, and the ₹5 lakh DICGC line

Close a five-year FD after 18 months and you do not get 7% for 18 months. You get the rate the bank was offering for an 18-month deposit on the day you opened it, minus a premature withdrawal penalty of 0.5 to 1 percentage point. SBI charges 0.50% on deposits up to ₹5 lakh and 1% above; HDFC and ICICI charge 1% on most tenures; several banks waive it if you reinvest with them. A deposit broken in the first week usually earns nothing.

If you might need part of the money, split it: five FDs of ₹1 lakh instead of one of ₹5 lakh, or a sweep-in account, or an overdraft against the FD at 1 to 2% over the FD rate instead of breaking it.

DICGC insures ₹5 lakh per depositor per bank, principal and interest together, across every account and branch of that bank. The default deposit is over the line before the interest is counted. For anything larger, the protection only rises if you spread across banks; a deposit in a spouse’s name at the same bank counts as a separate depositor. PMC Bank and Yes Bank were both within living memory, and the limit is not theoretical.

Small finance banks, tax-saving FDs and when an RD or PPF makes more sense

Small finance banks (Unity, Suryoday, Utkarsh, Jana, Ujjivan, Equitas) regularly quote 8% and above where SBI quotes 6.5 to 7%. They are RBI-licensed and DICGC-covered, so up to ₹5 lakh per bank the extra rate is not paid for with extra risk. Beyond ₹5 lakh it is. I keep small finance bank deposits under the insured line and do not think about them further.

A five-year tax-saving FD gives an 80C deduction under the old regime, locks the money completely (no premature withdrawal, no loan against it) and the interest is still taxable. Under the new regime it gives nothing a normal FD does not, and the income tax calculator will show which regime you are actually in before you accept a lock-in for a deduction you cannot use.

If the money is arriving monthly rather than sitting in your account today, the RD calculator is the right one; the return is much lower than an FD of the same total, for a reason explained there. For a 15-year horizon with zero risk and no tax at all, PPF at 7.1% tax-free beats any taxable FD for anyone above the 5% slab. And for a goal ten years or more away, a taxable 7% is a real loss against inflation once tax is paid; that is what the SIP calculator is for.

One last habit: set the maturity instruction when you open the FD. Auto-renewal at whatever the card rate is in five years is the default at most banks, and the rate then may be nothing like the one you booked.

FD Calculator