Question 1

How is FD interest calculated?

Accepted Answer

FD interest is calculated using compound interest: A = P × (1 + r/n)^(n×t). Most Indian banks compound quarterly (n=4). The interest earned is A minus P. Tax on FD interest is deducted as TDS at 10% if annual interest exceeds ₹40,000 (₹50,000 for senior citizens).

Question 2

Which bank gives the highest FD interest rate in 2025?

Accepted Answer

Small finance banks like Unity SFB, Utkarsh SFB, and ESAF SFB offer among the highest rates (8.5–9% p.a.). Among large banks, HDFC Bank and ICICI Bank offer 7–7.5% for 1–3 year tenures. Senior citizens typically get 0.25–0.5% extra.

Question 3

Is FD interest taxable?

Accepted Answer

Yes. FD interest is fully taxable as per your income tax slab. Banks deduct TDS at 10% if your interest income exceeds ₹40,000 per year (₹50,000 for senior citizens). You can submit Form 15G/15H to avoid TDS if your income is below the taxable limit.

Question 4

What is the difference between cumulative and non-cumulative FD?

Accepted Answer

A cumulative FD reinvests interest until maturity (you get principal + interest at the end). A non-cumulative FD pays interest at regular intervals (monthly/quarterly/annually). Cumulative FDs are better for wealth creation due to compounding. This calculator computes cumulative FD returns.

Question 5

Can I break an FD before maturity?

Accepted Answer

Yes, premature withdrawal is possible. Most banks charge a penalty of 0.5–1% on the applicable interest rate. The calculator shows ideal maturity value without premature withdrawal penalties.

Year	Value	Interest
Year 1	₹1.07 L	+₹7,291
Year 2	₹1.15 L	+₹15,114
Year 3	₹1.24 L	+₹23,508

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