How to Calculate Returns on Your Fixed Deposits

The rate of interest on FD is independent of any market fluctuation. In addition to this, some financial institutes offer the facility of premature withdrawal from FD, but in such a case, you have to pay a penalty. For example, the penalty charged on SBI fixed deposit in case of premature withdrawal is 0.50% for FDs of up to Rs. 5 lakhs and it is 1% for all the tenures of FDs of more than Ras 5 lakhs and less than Rs. 1 Crore.  

If you want to know the accurate amount that you will get at the time of the maturity of your FD and want to determine the interest rate on FD, then you can use the FD calculator. Or in other words, if you want to calculate returns on your fixed deposit amount, you can use the FD calculator.

How Can a Fixed Deposit Calculator Help?

Calculate the returns on your Fixed Deposit can be a time-consuming and complicated process. An online fixed deposit calculator enables you to figure it out without any hassle. The benefits of using an FD calculator are as follows:

• The calculation of FD maturity amount is a complex process as it involves many variables. However, an FD calculator does this job efficiently and provides you the accurate results just by clicking a single button.
• It helps you to save a lot of time on complex calculations.
• An FD calculator enables you to compare the interest rate on FD and the maturity amount offered by various financial institutions. This comparison helps you to make an informed decision as you have all the figures with you.

Formula Used by FD Calculator:

There are two types of fixed deposits offered by most of the banks and NBFCs. These FDs are – Compound Interest FD and Simple Interest FD. Generally, a website that provides you the FD calculator facility has calculators for both these FD types.

The FD calculator for FDs that offer simple interest use the below-mentioned formula:

M = P + (P x R x T / 100), where

• P stands for the principal amount
• T stands for tenure
• R stands for rate of interest offered by FD every year

Let us take an example to understand this. Suppose, you have deposited Rs. 1,00,000 for five years at the rate of interest of 10%, then as per the aforementioned formula:

M = 1,00,000 + (1,00,000 X 10 X 5/ 100)

   = Rs. 1, 50, 000

For compound interest FDs, the FD calculator uses the below-mentioned formula:

M = P + P {(1 + i / 100) t – 1}, where

• P is the principal amount
• t is the tenure
• i is the interest rate per period

For instance, if we take the same example with the same variables, the FD calculator for compound interest will calculate:

M = 1,00,000 + {(1 + 10/100) 5 – 1}

    = Rs. 1,61,051

Benefits of Using an FD Calculator:

You can know the exact amount that you will get from your FD at the time of its maturity by using an FD calculator. Apart from this, there are some other advantages of using an FD calculator:

• You can take an informed decision by comparing the maturity amounts of different banks and non-banking financial institutions.
• You will be able to plan your future financial needs well as you will be able to know the exact amount that you will get from your fixed deposit.

Factors Affecting the Maturity Amount and Interest Earned:

The factors that affect the maturity amount and interest earned on your FD are:

• Principal Amount: The interest that you have earned from your fixed deposit is directly related to the principal amount. The higher the principal amount, the more interest you will earn.
• Interest Rate on FD: Higher the interest rate on your FD, the higher interest you will earn.
• Type of Deposit: As mentioned earlier, there are two types of fixed deposits – cumulative fixed deposits that are compounded quarterly and they enable you to get the interest upon maturity. And the second type of fixed deposits is 'non-cumulative deposits'. In non-cumulative deposits, the interest is paid on a quarterly or monthly basis, as per your choice. You earn more in cumulative deposits as the interest earned is invested again.
• Senior Citizen: The senior citizens get a slightly higher rate of interest (generally it is 0.50% more than normal FD rates) than that normal people get. The reason for the same is their dependence on the interest for livelihood.

The Bottom Line:

The best part about an FD calculator is, you can calculate the maturity amount even before investing in an FD.  Hence, you can plan your future accordingly. Since most of the calculators are free to use so, you can compare different FDs and make an informed decision.