The rate on the card is not the return
A deposit advertised at 7% and compounded quarterly returns 7.186% over a year, because each quarter's interest starts earning interest of its own. The gap widens with the rate: at 9% quarterly the yield is 9.308%.
That is why the effective annual yield is a headline figure on this page. It is the only number that lets you compare two deposits with different compounding bases, and it is the number rate cards tend to print in the smaller type.
What a fixed deposit is good and bad at
The rate is contractual. Unlike a market-linked investment, the maturity figure is what you will actually get, which is the entire reason people use deposits.
The trade-off is that the rate is fixed for the term, so a deposit locked in before rates rise stays on the old rate, and one locked in before they fall looks very good. Breaking a deposit early usually costs a penalty of half a percentage point to a full point, which is not modelled here because it is a contract term rather than a rule.
Frequently asked questions
- How is a fixed deposit maturity amount calculated?
- P × (1 + r/n)^(nt), where P is the deposit, r the annual rate as a decimal, n how many times a year interest is added and t the term in years. On a rupee deposit n is almost always 4, because banks compound quarterly.
- What is the difference between the advertised rate and the yield?
- The advertised rate is nominal; the yield is what it is actually worth over a year once compounding is counted. 7% compounded quarterly yields 7.186%. Banks print both, and comparing one bank's nominal rate against another's yield is the most common way to pick the wrong deposit.
- Should I choose a cumulative or a payout deposit?
- A cumulative deposit leaves the interest in, where it compounds; a payout deposit pays it out each quarter, so it never compounds and you get back exactly what you put in at maturity. Over five years at 7% the cumulative option is worth about 6.5% of the deposit more. Choose payout only if you actually need the income.
- Is tax included?
- No. Interest on a deposit is taxable in most countries and is often withheld at source, and how much depends on where you are and what else you earn. Every figure here is before tax.
- How accurate is this?
- The arithmetic is exact and uses decimal rather than floating-point maths, so results are not skewed by rounding. Where a calculation depends on legislation, the page shows which rule year it used, when those rules were last checked and the official source they came from. Results are estimates for information, not advice.
- Are my figures sent anywhere?
- No. Every calculation runs inside your browser. Nothing you type - salary, income, dates or amounts - is sent to our servers, stored or logged. You can disconnect from the network after the page loads and the calculator keeps working.