As per the Reserve Bank of India, the share of fixed deposits stood at 57.7% in the financial year of 2017-18. This value saw a rise for the fiscal 2019 wherein total FD deposits had a market share of 58.5%. To promote growth in term deposits, several financial institutions are offering attractive interest rates on fixed deposits.
Fixed deposits are a popular choice for individuals who are investing for the first time as they provide guaranteed returns. Financial institutions offer additional benefits which help to enhance savings easily.
However, if the annual cumulative interest on your fixed deposit plus other deposits exceeds Rs.40,000 (Rs.50,000 for senior citizens), then financial institutions will deduct TDS. In case you earn less than the mentioned threshold, you need to know how to fill Form 15G and Form 15H to make sure that your financial institution does not deduct any tax. To calculate your annual interest income on your term deposit, you can take the help of an FD calculator.
What is an FD Calculator?
A fixed deposit calculator is an online tool with the help of which FD account holders can estimate the interest and total income earned. Taking the help of this calculator, investors can accurately compute their asset appreciation.
The calculated result is dependent on the following factors-
Invested Deposit Amount
The interest is calculated on the deposited amount in your fixed deposit account, so providing the information of your invested amount is vital for the calculator to estimate your maturity amount and the interest amount earned.
Type of FD Account Holder
Financial institutions offer interest rates according to the type of customers, which are –
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- New customer.
- Existing customer.
- An employee of the concerned financial institution.
- Senior citizen.
Tenor
The tenor of your investment is a key element to calculate your earned income from the interest rate offered.
By providing the above details on the fixed deposit calculator, on the website of your financial institution, or NBFCs such as Bajaj Finance, you can obtain the required results.
How is Your FD Interest Calculated?
FD account holders need to be aware of the annual income earned as interests on all deposits. If that amount exceeds the TDS threshold, FD account holders need to know how to fill Form 15G so that financial institutions do not deduct any tax.
Hence, learning how to calculate your interest amount without the help of a fixed deposit calculator is also important. The mathematical formula to calculate your FD interest depends on the type of fixed deposit.
For Cumulative FD
Cumulative FD interest is calculated annually, and FD account holders cannot withdraw before the time of maturity.
The formula to calculate FD interest in this case is – A = P (1 + r/n) ^ (n x t).
Where, A = maturity amount, P = principal amount, r = interest rate, n = number of times said interest is compounded, and t = tenor of investment. Hence, total interest earned = A – P.
For Non-Cumulative FD
In the case of non-cumulative FD, interest is calculated periodically and account holders can opt to withdraw the interest amount monthly, quarterly, semi-annually, and annually.
The formula for such FD interest calculation is – I = P x r x t/100.
Where, I = interest earned, P = principal amount, r = interest rate, and t = tenor of investment.
After calculating your fixed deposit interest, you will be able to assess if the annual interest income is taxable or not. If it is above Rs.40,000, you need to fill Form 15H if you are above the age of 60 while those under the age of 60 need to fill Form 15G. This form is a key element when you learn about the different ways how Indian youngsters are investing.
So, going through the above discussion, you should calculate FD interests before investing. Also, as a young account holder, knowing how to fill Form 15G is necessary.
