# How is fixed deposit interest calculated?

Make smart investment by calculating your fixed deposit interest.
4 mins
01 March 2023

Fixed Deposit (FD) is a sound and reliable investment tool for growing your savings. The rate of interest on your deposit depends on the tenure you choose, and the frequency of interest payouts.

The FD formula for the calculation of interest is shown below:
A=P(1+r/n)^n*t
where,

• A is the maturity amount
• P is the principal amount
• r is the rate of interest
• t is the number of years
• n is compounded interest frequency

### Why should you use the FD calculator?

Using a FD calculator is beneficial for several reasons:

• Accurate projections: An FD calculator gives you an estimate of the interest you can expect to receive on your investment, based on the principal amount, interest rate, and tenure. This helps you to plan your investments more accurately.
• Comparison tool: You can use an FD calculator to compare the returns from different fixed deposit schemes offered by different financial institutions and make an informed investment decision.
• Convenient and fast: An FD calculator provides quick and easy calculations, saving your time and effort compared to manual calculations.
• Helps with budgeting: An FD calculator can help you determine the amount you need to save each month to reach your financial goals.
• Shows the impact of compounding: An FD calculator shows the impact of compounding on your returns, helping you understand how reinvesting your interest can grow your savings over time.

In conclusion, an FD calculator is a valuable tool that can help you make informed investment decisions, plan your budget, and reach your financial goals.

### How to use FD calculator to calculate interest?

Using the FD calculator is very easy, and all you need to do is to enter the fixed deposit amount and tenure to calculate the amount receivable at maturity. It helps you calculate both – cumulative and non-cumulative payouts.

1. Choose the customer type: senior citizen or customer below 60 years of age
2. Choose the investment amount between Rs. 15,000 to Rs. 5 crore
3. Choose the tenure from 12-60 months
4. Select the frequency payout option: On maturity, monthly, quarterly, half-yearly, yearly

Based on the above selections you can see the interest rate applicable on your investment, total interest rate during your tenure, and maturity amount. It helps you save the manual work, and you can determine the return on your investment in no time.

### How are returns on your deposits calculated?

Calculating the return on your fixed deposit investment might seem tedious when one has to deal with large numbers. But knowing the right way to estimate would allow one to have higher returns at the end of the investment tenure. The interest payoff on FD’s maturity depends on the interest rate offered by the bank and the frequency of payoffs. The return on the principal amount invested is computed in two ways. One by simple interest, whereby the interest is earned only on the principal amount. Another by compound interest wherein interest is compounded, i.e., interest is earned on both, the principal amount and accrued interest. In the case of compound interest, the amount payable at maturity is higher, since interest is calculated on the principal amount and interest accrued on it.

### How to maximise the returns on your deposit?

To maximise the returns on your deposit, it is important to know the factors affecting your FD interest and amount. To maximise returns on your deposit, consider the following strategies:

• Look for the highest interest rate: Compare interest rates offered by different banks and financial institutions to choose the one that offers the highest interest rate.
• Invest for a longer tenure: Generally, a longer tenure results in a higher interest rate, hence consider investing for a longer period of time.
• Opt for compounding: Choose a fixed deposit that offers the option of compounding, where interest earned is reinvested and generates more interest, resulting in higher returns.
• Diversify your portfolio: Do not put all your eggs in one basket, consider investing in different fixed deposit schemes to diversify your portfolio and minimise the risk of loss.

Before investing in a fixed deposit, consider the credit rating of the financial institution and the stability of the economy, as these factors can impact the safety of your investment.

Based on your convenience, and the above factors, you can choose the tenures, payout frequencies, deposit types and mode of investment to grow your savings. You can choose to invest in a Bajaj Finance Fixed Deposit to get an attractive rate of interest, which can enable you to maximise the returns on your deposit.