The fixed deposit scheme is known for offering better interest income than traditional savings accounts. Typically, the interest on a fixed deposit is compounded on a quarterly basis. Individuals can use the fixed deposit scheme formula to find out how much returns they can expect on their deposits.

The formula can help gain a better understanding, the same entails several steps which may be cumbersome and complex. However, fixed deposit holders can easily avoid such troubles by using an FD interest calculator**.** Such a financial tool is designed to offer accurate results instantly.

That said, let us check out how the FD interest calculator works and how it helps users.

**The formula of Fixed Deposit**

There are two methods to calculate fixed deposit maturity amount based on how the interest is compounded.

**Simple Interest Fixed Deposit**

In this particular method, the users multiply the investment amount, the interest rate, and the tenure to determine the maturity amount.

In other words, the calculator uses the simple interest formula –

SI = P x R x T divided by 100

Here,

P is the principal amount

R is the rate of interest

T is the tenure

**Example of Fixed Deposit Simple Interest **

Rajat invests Rs 10,000 at the rate of 6% per annum for 5 years. At the end of the 5-year tenure, he will receive:

SI = (P x R x T)/100

= 10,000 x 6 x 5/100

= Rs 3000

**Compound Interest Fixed Deposit Method**

This particular method allows users to earn interest on their interest income, facilitating corpus building.

**Example of Compound Interest Fixed Deposit**

Richa opens an FD account with Rs. 10,000 at the rate of 6% per annum for a tenure of 5 years. On maturity, she will receive:

Compound Interest = P {(1 + i/100) n – 1}

Here,

P is the principal amount

i is the interest rate

n is the tenure

Hence, as per the formula

Compound Interest (CI) = 10000 {(1 + 6/100)5 – 1}

= Rs. 3,469

Richa will earn Rs. 3,469 on her fixed deposit investment.

FD maturity amount is calculated using this formula

A = P * (1+ r/n) ^ n*t

**Whereas, FD interest is determined using**

I = A – P

Here,

A = Maturity value of the fixed deposit

P = Principal amount

r = The rate of interest

t = Investment tenure

n = Compound interest frequency

I = Interest earned

**Features and Benefits of Using the FD Interest Calculator**

Here are the key features and associated benefits of using an online FD interest calculator:

**User friendly:**The financial tool can be used by anyone with a basic knowledge of calculators or the internet.**Quick**: Being fed with the fixed deposit interest formula, the calculator offers automated results within seconds once the users enter key FD deposits.**Free to use:**The FD interest calculator is easily accessible online and is made available free of cost. This encourages more people to use it and simplifies their financial planning.**Offers a breakdown:**FD interest calculator offers users a breakdown of the estimated maturity amount and interest earnings. This helps them to plan their financial goals better and navigate the expenses effectively.**Facilitates comparison:**The FD interest calculator allows multiple readjustments to the inputs and offers results instantaneously. This facilitates better comparison of different fixed deposit plan’s interest and helps users pick one that suits their financial goals the most.

This becomes possible as it allows users to identify which combination of tenure and principal amount would prove to be the best to reach their goals. Similarly, it offers an idea about how compounding interest tends to affect fixed deposit returns. Based on the quick outcome individuals can plan their fixed deposit better to reach their goals. However, one must remember that the tool is just a financial planning instrument and does not necessarily provide real-time information such as gold price, **CIBIL credit score**, or inflation rate.

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**How to Use an FD Interest Calculator?**

An online FD interest calculator comes I’m handy to compute the fixed deposit interest and the final amount the account holder would be likely to receive at maturity. The user-friendly financial tool needs users to enter necessary fixed deposit detail to derive accurate results in seconds.

One needs to follow these easy steps to use the fixed deposit interest calculator:

Step 1: Open an online FD interest calculator

Step 2: Choose customer type – regular customer or Senior citizen customer

Step 3: Select the type of deposit from the options-

- Short term
- Monthly payout
- Quarterly payout
- Reinvestment

Step 4: Enter the deposit amount

Step 5: Enter investment horizon – tenure in year

Once these key details are entered, the fixed deposit calculator will offer information about the maturity value and estimated interest amount right away.

**Key Benefits of Using Fixed Deposit**

Here’s how one can benefit from a fixed deposit account

- Fixed deposits can serve as collateral and help take out loans. FD account holders can take out up to 80-90% of loans from their deposit
- Depositors have the option to transfer a fixed deposit amount on maturity to open another FD account
- Fixed deposit schemes are considered to be a lucrative investment tool, especially for those with low-risk appetite.

However, it should be noted that FD schemes levy a penalty on premature withdrawals.

**Tax Benefits on Fixed Deposit**

Fixed deposit schemes are subject to taxation under the Income Tax of India Act. To elaborate, the returns on a fixed account are subject to a TDS of 10% if the total interest amount on a normal account is more than Rs. 40,000 in a year, and at the rate of 20% on proceeds over Rs. 50,000 for senior citizens. However, individuals can avoid the taxes by submitting a 15G (15H for senior citizen) form to the FD provider, if their proceeds is less than the taxable limit.

Using a calculator in advance would help understand whether a user’s FD proceeds would be subject to TDS or not. In turn, it will help plan tax benefits and claims better.

Hence, an FD interest calculator proves useful in these ways and can simplify an individual’s financial planning significantly and help them improve their strategies.