1. How Fixed Deposit Compounding Works
A Fixed Deposit (often called a term deposit or certificate of deposit) is a highly reliable savings asset offered by retail banks and credit unions. You deposit a lump-sum principal for a predetermined duration (tenure) at a locked-in, guaranteed interest rate. Over time, interest is credited and added back to your balance, compounding progressively based on your chosen frequency.
CHECK OUT OUR ROI CALCULATOR2. Standard Compounding Frequencies and Simple Interest
The rate at which your investment expands depends directly on your compounding frequency:
- Quarterly Compounding: The standard industry baseline. Interest is calculated and added to the principal balance four times a year.
- Monthly Compounding: Ideal for investors seeking monthly payouts, though keeping interest in the pool maximizes long-term compounding.
- Simple Interest: No compounding. Interest is calculated strictly on the initial principal value across the entire lifespan.
3. Factoring TDS and Real Purchasing Power
In almost all financial jurisdictions, the interest earned on Fixed Deposits is considered taxable income. Banks often deduct this tax at source (known as Tax Deducted at Source or TDS). Additionally, inflation erodes the future value of your money. Our calculator processes both variables, helping you visualize the actual purchasing power of your funds at maturity.