FD example
₹2 lakh fixed deposit for 3 years
At 7% a year, compounded quarterly, ₹2 lakh in an FD for 3 years grows to ₹2.46 lakh. That is ₹46,288 of interest before tax.
Result
₹2,46,288
Maturity value after 3 years
- Amount deposited
- ₹2,00,000
- Interest earned
- ₹46,288
- Effective yearly yield
- 7.19%
- Monthly interest, if paid out
- ₹1,167
- In today's money (6% inflation)
- ₹2,06,788
Quarterly compounding turns 7% into 7.19% a year, because each quarter's interest earns interest too.
FD interest is taxed at your income tax slab rate, and banks deduct TDS once a year's interest crosses the threshold, so the return you keep is lower.
₹2 lakh for 3 years at different FD rates
| Interest rate | Interest earned | Maturity value |
|---|---|---|
| 6% | ₹39,124 | ₹2,39,124 |
| 6.5% | ₹42,682 | ₹2,42,682 |
| 7% | ₹46,288 | ₹2,46,288 |
| 7.5% | ₹49,943 | ₹2,49,943 |
| 8% | ₹53,648 | ₹2,53,648 |
Rates here are illustrative. FD rates differ by bank and tenure and move with the repo rate; most banks pay senior citizens a little more.
₹2 lakh at 7% for different tenures
| Tenure | Interest earned | Maturity value |
|---|---|---|
| 1 year | ₹14,372 | ₹2,14,372 |
| 2 years | ₹29,776 | ₹2,29,776 |
| 3 years | ₹46,288 | ₹2,46,288 |
| 5 years | ₹82,956 | ₹2,82,956 |
| 10 years | ₹2,00,319 | ₹4,00,319 |
Year by year at 7%
| Year | Interest so far | Balance |
|---|---|---|
| 1 | ₹14,372 | ₹2,14,372 |
| 2 | ₹29,776 | ₹2,29,776 |
| 3 | ₹46,288 | ₹2,46,288 |
How this is worked out
A cumulative FD adds each quarter's interest to the deposit, so the next quarter's interest is earned on a larger balance. The maturity value is A = P × (1 + r/4)^(4t), where P is ₹2 lakh, r is 7% and t is 3 years.
If you choose a monthly payout instead, the interest is paid to your bank account as it accrues and does not compound. On ₹2 lakh at 7% that is about ₹1,167 a month, and you get exactly ₹2 lakh back at the end.
Tax changes the picture. Interest is added to your income and taxed at your slab rate each year, whether or not it is paid out. At a 30% slab, a 7% FD keeps roughly 4.90% after tax, below 6% inflation, which is why the inflation-adjusted value matters: ₹2.46 lakh in 3 years buys about what ₹2.07 lakh buys today.
Frequently asked questions
Results are estimates for education and planning, not financial advice.
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