How to Calculate FD Maturity Amount?

You may have been advised to invest in Fixed Deposits (FD) when you had your very first job. Why not? FD is considered the most sought-after, secured, straightforward and stable investment option for a newbie. Moreover, the high return that FD offers acts as icing on the cake. Through research on which bank offers the best FD interest rates acts as a solid foundation.

The interest you earn on your FD deposit amount adds to your saving by means of compounding. What if you could get a fix on the maturity amount of your FD even before you go ahead with your investment? Here’s how you can calculate the FD maturity amount beforehand:

Manual FD Calculation:

The determining factors for the return on FD are:

• Rates of interest

• Frequency of interest payouts

The annual compounding formula is A = P (1+r/n) ^n*t

Where,

• A = maturity amount

• P = principal amount

• r = interest rate

• n = compounded interest frequency

• t = number of years

An illustration would help understand better:

Say, you invest Rs.5,00,000 (P) in FD for 5 years (t) at a rate of interest of 7.1% (r), which is compounded annually (n=1). Considering the above data, your maturity amount on FD at the end of the term would be:

A = 5,00,000 (1+7.1%/1)^1*5 = Rs.7,04,559

Online FD Calculator:

Manual FD calculation can often prove to be complicated and strenuous. In comparison, calculating FD maturity amount online is a cakewalk. The following steps show how an online FD calculator works:

• Select customer type—New Customer/ Existing Loan Customer/ Senior Citizen

• Select the type of FD you want—Cumulative/ Non-cumulative

• Settle on an FD amount

• Select a tenor that suits you

Once these are entered, both the interest amount and the maturity amount on your FD gets reflected on your computer screen automatically.

Advantages of Online FD calculator:

When you manually calculate the FD maturity amount you often find out that it is tricky, exhausting and time-consuming. An online FD calculator does the calculation for you merely by punching in a few information. The online FD calculator is better because:

• FD maturity calculations are convoluted. The process involves multiple variables. An online FD calculator does all the complicated tasks on your behalf and gives you the exact answer in no time.

• It is less time-consuming when compared with manual calculations.

• It helps you draw a comparative study of the maturity amount and interest rates of FDs offered by various banks. Select the one that offers the best FD interest rates.

What should you keep in mind before investing in FD?

• Depending entirely on FD as a counterbalance for inflation is not a good option

• Do not invest your entire savings in FD as you cannot easily withdraw money from it before the tenure expires.

• Penalty has to be paid if you want to close your FD account before it matures. You often end up getting 0.5-1% less.

• Mention what you earn from your FD interest while filing for an IT return as FD interest is not tax-free.

• An in-depth research of the prices available in the market is required before you invest in an FD. Choose an FD that gives you maximum stability and return.

Long-story-short:

When your hard-earned money is at stake, a bit of net-practising won’t harm. Calculating the FD maturity amount beforehand will only aid in making an informed decision. When you choose the bank that offers the best FD interest rates, your money grows faster.

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