Fixed deposits or FD is a term deposit with a higher rate of interest than a regular account. Since it is not aligned with market fluctuations, it is one of the most popular tax saving investment tools preferred by investors. Since several banks and financial platforms have now risen in the area of FD investment, knowing the maturity amount for a deposit can help investors make an informed decision. Devised below are the checkpoints and calculations an investor has to consider while calculating the maturity amount.
Factors affecting the maturity amount
The maturity amount received from an Fixed deposit (FD) account is dependent on the tenure, interest rates, age of the applicant, the scheme chosen, and the bank.
- Investors can choose to invest for a period ranging from 7 days to 10 years. As the tenure becomes longer, the income received from an FD account also varies.
- The FD interest rates vary from 4% to 8%, depending on the bank. Inflation and RBI repo rates can also influence the interest rates offered by banks.
Banking platforms such as PNB housing offers interest rates up to 8.07%
- Senior citizens receive 0.25% to 0.75% higher interest than regular deposits. In banking platforms such as PNB, Senior citizens are eligible for 0.25% higher interest.
- FD Interest rates for FD deposits vary for cumulative and non-cumulative options.
- In the Cumulative option, the interest is compounded quarterly or yearly, and interest is paid at the time of maturity.
- In Non-Cumulative FD, interest is paid quarterly, half-yearly, or annually depending on the investor’s choice.
FD Calculation formula
The fixed deposit interest rates are calculated based on interests and frequency of payouts.
FD amount at maturity calculation formula is: A = P (1 + r/4/100) ^ (4*n) and A = P (1 + r/25)4n.
Where A – the amount at maturity
R- the rate of interest
n- compounded interest rate frequency
For eg. Consider an investment made for Rs 1,00,000 for a tenure of 3 years and 10% interest
Here: Principal = Rs 1,00,000
Rate of interest = 10%
Interest rate frequency = 4
Hence, Amount at maturity = 1,00,000(1+ 10/4/100)^ (4*3)
Hence, the interest received over the tenure is: (1,34,488.88-1,00,000) = 34,488.88
Using FD Calculator
FD maturity calculators are a hassle-free tool to compute the interest income and amount received over maturity. Several banking and independent platforms offer FD calculators online. These calculators compute the interest for both cumulative and non-cumulative FD options.
The benefits of using an FD calculator are:
● A high degree of correctness since it is an automatic calculator
● Saves time and effort while performing cumbersome calculations involving multiple tenures, amount and rates
● Most platforms offer an FD calculator for free usage. So, investors can compare the different FD interest rates and make an informed decision.