FD Guide
How is FD Interest calculated?
Most banks in India calculate interest on a Quarterly Compounding basis. The formula used is:
A = P x (1 + r/n)^(n*t)
Where 'n' is 4 (quarters in a year). This means your money earns interest on the interest every 3 months.
Taxation on FD
The interest earned on Fixed Deposits is fully taxable as per your income tax slab. If the interest exceeds ₹40,000 (₹50,000 for seniors) in a financial year, the bank deducts TDS (10%).
Benefits of FD
- Safety: FDs are one of the safest investment options.
- Guaranteed Returns: The interest rate is fixed at the time of booking.
- Liquidity: You can break an FD anytime (usually with a small penalty).