It catches a lot of first-time FD holders off guard: you open a fixed deposit, and a year later notice the bank has quietly deducted tax before crediting your interest.
Banks are required to deduct TDS at 10% on FD interest once it crosses ₹40,000 in a financial year (₹50,000 for senior citizens), across all your FDs with that bank combined. This isn't a separate tax — it's an advance collection against your actual tax liability, which is settled when you file your return.
If your total income is below the taxable threshold, you can avoid this deduction entirely by submitting Form 15G (or Form 15H if you're a senior citizen) to your bank at the start of the financial year, declaring that your income doesn't require TDS. If TDS was already deducted despite your income being non-taxable, you can claim it back as a refund when you file your ITR — it isn't lost, just requires you to file to get it back.
One nuance worth knowing: TDS is deducted only when interest is paid or credited, but the interest itself is taxable in the year it accrues, whether or not you've withdrawn it — so cumulative FDs still generate a yearly tax liability even though you see no cash until maturity.
Frequently asked questions
What is a fixed deposit return calculator?
It estimates the maturity value of a fixed deposit based on the principal amount, the interest rate, the tenure, and how frequently the interest is compounded — monthly, quarterly, half-yearly, or annually — since compounding frequency changes the effective return.
How does compounding frequency affect FD returns?
More frequent compounding means interest is calculated and added to the principal more often, so each subsequent interest calculation is on a slightly larger base. A monthly-compounded FD therefore yields marginally more than the same nominal rate compounded annually, though the difference is usually small.
What is the formula used for FD maturity value?
The calculator uses A = P × (1 + r/n)^(n×t), where P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the tenure in years.