Cumulative FDs and Non-Cumulative FDs - An Overview

Fixed Deposit is considered one of the safest investment instruments. Millions of Indians invest in it as it provides guaranteed returns. Banks and non-banking financial institutes provide different types of fixed deposits, but the main types that you may hear while opening an FD account are cumulative FD and non-cumulative FD. These two types bifurcate as per how you select to receive your interest pay-outs.

Read more
Best Investment Plans
  • Save upto ₹46,800 in tax under Sec 80C

  • Inbuilt Life Cover

  • Tax Free Returns Unlike FD+

In-built life cover
Get Guaranteed returns upto 7.5%*
Invest in 100% Guaranteed Return Plans with Tax benefits under sec 80C & No Tax on returns*
+91
Secure
We don’t spam
View Plans
Please wait. We Are Processing..
Your personal information is secure with us
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs Tax benefit is subject to changes in tax laws
Get Updates on WhatsApp
We are rated~
rating
58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold

However, if you are thinking about which bank is the best for a fixed deposit? And which type of interest pay-out should you select, we are here providing a brief description of the differences between cumulative FD and Non-Cumulative FD.

What is Cumulative FD?

The meaning of cumulative is accumulation. In the same manner, cumulative fixed deposits mean a fixed deposit where the interest is collected or accumulated till the maturity period ends. The interest that you earn in one year or throughout one cycle of this FD is added or reinvested to the previous principal amount and thus it increases the principal amount. In this way, it pumps up the interest earned. The power of compounding here is used at its best. You get the amount of maturity as soon as your FD matures, which is the sum of your initial deposited amount and the interest that is accumulated.

Comparison Between
Fixed Deposits, Guaranteed Return Plans & Debt Mutual Fund
Guaranteed Return Plans, Fixed Deposits &
Debt Mutual Fund
Guaranteed Return Plans
Returns Before Tax
7.5% (TAX-FREE)
Returns After Tax
7.5%
Guaranteed Returns
Yes
Life Cover
Yes
Tax on Profit
Tax Free*
Risk
No Risk
awards
Still Better than FD’s and Debt Mutual Fund
Fixed Deposits
Returns Before Tax
7% (TAXABLE)
Returns After Tax
4.8%
Guaranteed Returns
Yes
Life Cover
No
Tax on Profit
Taxable
Risk
Low Risk
Debt Mutual Fund
Returns Before Tax
8% (TAXABLE)
Returns After Tax
5.5%
Guaranteed Returns
No
Life Cover
No
Tax on Profit
Taxable
Risk
High Risk
VIEW PLANS
*For annual premium upto ₹5 Lacs

Who Should Invest in Cumulative Fixed Deposits?

This type of fixed deposit scheme is suitable for those who do not depend on income through interest. Generally, people with a stable job and income and people who are earning well through their business invest in this.

So, if you want a particular amount in the future, and can easily manage without a particular interest regularly, you can consider cumulative FD.

What is Non-Cumulative FD?

A non-cumulative FD is a type of fixed deposit where the accrued interest is paid on regular basis to the depositor. The interval in which the interest is paid may vary from quarterly to monthly and sometimes to semi-annually. In this way, a non-cumulative FD provides a regular pay-out to its investors as the interest is not kept by the bank. The rate of interest offered by banks for non-cumulative FDs is lesser as compared to cumulative FD as the power of compound is not utilized here properly.

fd return beater

Who Should Invest in Cumulative Fixed Deposits?

Non-cumulative fixed deposits are the best for pensioners, housewives, freelancers, and those who want regular income through their savings.

Difference Between Cumulative and Non-Cumulative Fixed Deposits?

The below-mentioned table compares the features of both these types of fixed deposits, let us see:

Features Cumulative FD Non-Cumulative FD
Frequency of Interest Pay-out Upon maturity Can be monthly, annually, half-yearly, quarterly, and according to the choice of the investor.
Interest Accumulation The interest is accumulated across the tenure of FD The interest is not accrued as it is paid out at regular intervals.
Total Earned Interest The interest that is earned is higher as the interest that is yielded across the tenure is accumulated and added to the principal amount for further compounding. The earned interest is lower and the pay-out amount gets decreased when the frequency of payment gets higher.
Periodic Income There is no provision of periodic income. The periodic income is yielded throughout the tenure.
Best Suited For This type of FD is best suited for the investors who are looking for growth in the savings, and for creating a large corpus for achieving their investment goals. The investors are looking out for the funds for day-to-day expenses without making any dent in the principal amount.

Steps to Maximize Returns on Fixed Deposits:

The returns from FD can be maximized by investing in cumulative fixed deposits. This is because the interest earned here is reinvested regularly. Therefore, the interest that you accrued in the initial cycle of FD is added to the principal amount. This consecutively leads to an increase in the principal amount. Whereas, the interest accrued in the second cycle of FD is calculated on the increased principal amount that again leads to a higher interest. This pattern continues until the maturity of your FD. So, at the end of the tenure of fixed deposit, the interest gets higher than your non-cumulative FD and hence the returns are swelled to the maximum.

FD interest rates India have fallen consistently over the last 12 years.
Invest in Plans that offer Guaranteed Returns for over 25 Years

Cumulative FDs Vs. Non-Cumulative FDs, Which One Is Better?

The choice between these two modes of interest pay-outs can be as per your preference. If your purpose of investment is to add something to your existing income or get a pension after retirement, then you must select a non-cumulative fixed deposit.

However, if your purpose of investment is not to look for any add-on but to multiply your existing savings at a good exponential rate, you can opt for a cumulative fixed deposit without any second thought.

You may like to Read: SBI FD Interest Rates

An Example:

Suppose, you deposit Rs. One Lakh in a fixed deposit for a tenure of five years with an 8.5% rate of interest and you selected monthly compounding frequency in the cumulative FD. In such a situation, you will get Rs. 1,52,730 upon maturity. However, if you select quarterly compounding for Rs. One Lakh and with the same rate of interest, you will get Rs. 1,52,279 upon maturity. If you select half-yearly compounding for this principal amount and the same rate of interest, you will get Rs. 1,51, 621 upon maturity. If you select yearly compounding frequency on the same principal amount and with the same rate of interest, then the amount that you will get at maturity would be Rs. 1,50,365.

However, if you opt for non-cumulative FD for a tenure of five years and on yearly basis at the rate of interest of 9.25%, you will get Rs. 1,46,250 upon maturity. The interest earned is Rs. 46,250. On a half-yearly, quarterly, and monthly basis for the same principal amount with the same rate of interest and same tenure, the maturity amount will be Rs. 1,45,250, Rs. 1,44,750, and Rs. 1,44,500 respectively.

The Bottom Line!

Finally, it is up to you which scheme you select for your investment in a fixed deposit. You can choose a type as per your needs.

Allahabad Bank FD Interest Rates

Allahabad Bank FD Interest Rates

Andhra Bank FD Interest Rates

Andhra Bank FD Interest Rates

Assam Gramin Vikash Bank FD Interest Rates

Assam Gramin Vikash Bank FD Interest Rates

AU Small Finance Bank FD Interest Rates

AU Small Finance Bank FD Interest Rates

Axis Bank FD Rates

Axis Bank FD Rates

Bajaj Finance FD Interest Rates

Bajaj Finance FD Interest Rates

Bandhan Bank FD Interest Rates

Bandhan Bank FD Interest Rates

Bangiya Gramin Vikash Bank FD Interest Rates

Bangiya Gramin Vikash Bank FD Interest Rates

Bank of Baroda FD Interest Rates

Bank of Baroda FD Interest Rates

Bank of Ceylon FD Interest Rates

Bank of Ceylon FD Interest Rates

Bank of India FD Interest Rates

Bank of India FD Interest Rates

Bank of Maharashtra FD Interest Rates

Bank of Maharashtra FD Interest Rates

Baroda Gujarat Gramin Bank FD Interest Rates

Baroda Gujarat Gramin Bank FD Interest Rates

Canara Bank FD Interest Rates

Canara Bank FD Interest Rates

Capital Small Finance Bank FD Interest Rates

Capital Small Finance Bank FD Interest Rates

Central Bank of India FD Interest Rates

Central Bank of India FD Interest Rates

Citibank FD Interest Rates

Citibank FD Interest Rates

City Union Bank FD Interest Rates

City Union Bank FD Interest Rates

Corporation Bank FD Interest Rates

Corporation Bank FD Interest Rates

Dakshin Bihar Gramin Bank FD Interest Rates

Dakshin Bihar Gramin Bank FD Interest Rates

DBS Bank FD Interest Rates

DBS Bank FD Interest Rates

Dena Bank FD Interest Rates

Dena Bank FD Interest Rates

Dhanlaxmi Bank FD Interest Rates

Dhanlaxmi Bank FD Interest Rates

Equitas Small Finance Bank FD Interest Rates

Equitas Small Finance Bank FD Interest Rates

ESAF Small Finance Bank FD Interest Rates

ESAF Small Finance Bank FD Interest Rates

HDFC Bank FD Interest Rates

HDFC Bank FD Interest Rates

HSBC FD Interest Rates

HSBC FD Interest Rates

ICICI Bank FD Interest Rates

ICICI Bank FD Interest Rates

IDBI Bank FD Interest Rates

IDBI Bank FD Interest Rates

IDFC First Bank FD Interest Rates

IDFC First Bank FD Interest Rates

Indian Bank FD Interest Rates

Indian Bank FD Interest Rates

Indian Overseas Bank FD Interest Rates

Indian Overseas Bank FD Interest Rates

IndusInd Bank FD Interest Rates

IndusInd Bank FD Interest Rates

Jana Small Finance Bank FD Interest Rates

Jana Small Finance Bank FD Interest Rates

Karnataka Bank FD Interest Rates

Karnataka Bank FD Interest Rates

Kerala Gramin Bank FD Interest Rates

Kerala Gramin Bank FD Interest Rates

Kotak Mahindra Bank FD Interest Rates

Kotak Mahindra Bank FD Interest Rates

Lakshmi Vilas Bank FD Interest Rates

Lakshmi Vilas Bank FD Interest Rates

Muthoot Capital

Muthoot Capital

Nainital Bank FD Interest Rates

Nainital Bank FD Interest Rates

Odisha Gramya Bank FD Interest Rates

Odisha Gramya Bank FD Interest Rates

Paschim Banga Gramin Bank FD Interest Rates

Paschim Banga Gramin Bank FD Interest Rates

Paytm Payments Bank FD Interest Rates

Paytm Payments Bank FD Interest Rates

PNB FD Interest Rates

PNB FD Interest Rates

Prathama UP Gramin Bank FD Interest Rates

Prathama UP Gramin Bank FD Interest Rates

RBL Bank FD Rates

RBL Bank FD Rates

Saurashtra Gramin Bank FD Interest Rates

Saurashtra Gramin Bank FD Interest Rates

SBI FD Interest Rates

SBI FD Interest Rates

Shriram Finance FD Interest Rates

Shriram Finance FD Interest Rates

State Bank of Hyderabad FD Interest Rates

State Bank of Hyderabad FD Interest Rates

State Bank of Mysore FD Interest Rates

State Bank of Mysore FD Interest Rates

State Bank of Travancore FD Interest Rates

State Bank of Travancore FD Interest Rates

Syndicate Bank FD Interest Rates

Syndicate Bank FD Interest Rates

Tamil Nadu Grama Bank FD Interest Rates

Tamil Nadu Grama Bank FD Interest Rates

Telangana Grameena Bank FD Interest Rates

Telangana Grameena Bank FD Interest Rates

Tripura Gramin Bank FD Interest Rates

Tripura Gramin Bank FD Interest Rates

UCO Bank FD Interest Rates

UCO Bank FD Interest Rates

Ujjivan Small Finance Bank FD Interest Rates

Ujjivan Small Finance Bank FD Interest Rates

Union Bank of India FD Interest Rates

Union Bank of India FD Interest Rates

Uttar Bihar Gramin Bank FD Interest Rates

Uttar Bihar Gramin Bank FD Interest Rates

Uttarakhand Gramin Bank FD Interest Rates

Uttarakhand Gramin Bank FD Interest Rates

Vijaya Bank FD Interest Rates

Vijaya Bank FD Interest Rates

Yes Bank FD Interest Rates

Yes Bank FD Interest Rates

Expand

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
+ Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
#Discount offered by insurance company
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

FD Calculator

Total Investment

₹500 ₹30L
Enter Total Investment

Rate of Interest (Yearly)

1% 15%
Rate of Interest (Yearly)

Time Period

1 Year 15 Years
Enter Time Period
Interest Earned
Maturity Amount

FD Rates articles

Recent Articles
Popular Articles
BOI FCNR (B)

10 Jul 2024

BOI FCNR (B) Deposits, also known as Foreign Currency
Read more
BOI NRE Term Deposit Account

10 Jul 2024

BOI NRE Term Deposit Account is a fixed deposit account offered
Read more
BOI RFC Term Deposit

10 Jul 2024

BOI RFC Term Deposit is a fixed deposit account offered by the
Read more
BOI NRO Term Deposit Account

10 Jul 2024

BOI NRO Term Deposit Account is a fixed deposit account offered
Read more
BOI Current Deposits Plus Scheme

10 Jun 2024

The BOI Current Deposits Plus Scheme is a unique option for
Read more
Application for Withdrawal of Fixed Deposit
  • 03 Dec 2021
  • 22878
Fixed Deposits are the safest investment instruments. You invest the amount of your choice as the fixed deposit
Read more
Which Bank has the Highest Interest Rate for Fixed Deposit?
  • 23 Jul 2018
  • 211501
The Small Finance Banks offer the highest FD interest rates for a tenure between 7 days to 10 years. Unity Small
Read more
SBI Fixed Deposit Monthly Income Scheme
  • 04 Apr 2022
  • 12302
Fixed deposits are the safest investment vehicles for Indian financial planners. You can open a fixed deposit
Read more
SBI Fixed Deposit Double Scheme
  • 18 Feb 2022
  • 12527
The SBI Fixed Deposit Double Scheme is named Special Term Deposit to cater to investors looking to double their
Read more
Nominee Vs Legal Heirs for Fixed Deposits
  • 21 Dec 2023
  • 3226
Fixed deposits are a popular investment option for individuals who wish to earn a stable rate of interest on
Read more

top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL