Formula and Examples to Calculate Interest on Fixed Deposit

A fixed deposit is an investment where you deposit a fixed amount for a fixed duration. The rate of interest offered on a fixed deposit also remains constant throughout the entire duration. You can easily calculate the amount you will receive on the maturity..

Formula and Examples to Calculate Interest on Fixed Deposit 1

It is quite beneficial to know the exact amount if in case you are thinking of reinvesting the amount or planning to buy something once the FD matures. You can use the formula and examples of how FD interest is calculated that will be discussed here. 

First, let us look at the different methods of interest calculation on a fixed deposit:

Compound Interest Formula for fixed deposit

Compound interest is the method of calculation in which the interest is calculated not only on the principal but also on the interest that you earn periodically. Therefore, the interest is generated more by an FD plan and hence, your deposit grows much faster.

Because the interest compounds quarterly in an FD, your interest earnings of last quarter will also be included along with the principal amount when you calculate your total interest earnings from the investment.

 The formula to calculate the interest by compound interest is as follows:

 C = P ((1+i/100)^n -1)

 Here,

C = Compound interest 

P = Invested amount i.e. principal

r = interest rate

n = number of times for which the interest is compounded

For example, if you deposit Rs. 10,000 for a duration of 5 years at 8% interest rate per year then the compound interest will be:

C = 10000 ((1+8/100)5-1) = 4693

Banks calculate the interest of an FD as per the compound interest formula. Compound interest naturally helps your deposits grow faster but the interest rate offered on that particular FD should also be higher.

The interest rate calculation through the compound interest formula is fairly complicated.  To make it simple banks and finance companies have started providing FD interest rate calculators on their websites.

You can easily find an FD calculator that displays both interest and final maturity amount depending on the type of fixed depositi.e., cumulative, non-cumulative, or tax saving FD. Therefore, you need not calculate the interest and total earnings manually.

Some other benefits of using an FD calculator are:

  • The chances of errors reduce to a great extent as it does not involve or need any manual calculations.
  • You do not have to worry about the complex calculations as the FD calculator does everything once you enter the duration, FD type, and other details.
  • No fees are charged for the use of the online calculator. As a result, you can use them as many times as you want before investing in an FD.

You can open an FD account by filling up an online FD form and submit your documents online as well. 

If you invest your money through Bajaj Finance Fixed Deposit, the deposited amount will grow at one of the highest FD rates in the market as interest rates up to 7.60% are provided for regular customers and up to 7.85% on Senior Citizen Fixed Deposits. Moreover, you can also invest in multiple FDs using a single cheque.  Your deposits are safe as Bajaj Finance FD has been credited highly for its safety and stability by ICRA and CRISIL, the foremost credit rating organizations in India.

The interest on an FD is compounded periodically or the entire duration as it depends on the type of FD you have invested in. However, to avoid the complex calculations, many banks and finance companies provide FD interest rate calculators on their website. These calculators can be used to calculate the returns and interest earnings precisely just by entering a few details like amount, FD type i.e. cumulative or non-cumulative FD, etc. Bajaj Finance has a user-friendly FD calculator that calculates both interests and returns, simultaneously. It offers many other features like online application, multi-deposit facility, etc. that will help you to grow your savings conveniently.

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