1. What Is The Compound Interest Formula?

The compound interest formula calculates the maturity amount for Indian fixed deposits by accounting for the effect of compounding, where interest is earned on both the principal and accumulated interest over time.

2. How Does The Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( P \) — Principal amount (INR)
• \( R \) — Annual interest rate (decimal)
• \( n \) — Compounding frequency per year
• \( T \) — Time period in years
• \( A \) — Maturity amount (INR)

Explanation: The formula calculates how much an investment grows when interest is compounded at regular intervals, making it ideal for fixed deposit calculations.

3. Importance Of Compound Interest Calculation

Details: Understanding compound interest helps investors maximize returns on fixed deposits by choosing optimal compounding frequencies and time periods.

4. Using The Calculator

Tips: Enter principal in INR, annual interest rate as percentage, select compounding frequency, and time in years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest includes interest on previously earned interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (monthly vs annually) results in higher returns due to more frequent interest calculations.

Q3: Are there tax implications on FD interest?
A: Yes, interest earned on fixed deposits is taxable under Indian income tax laws as per your applicable tax slab.

Q4: What is the typical FD interest rate range in India?
A: Rates typically range from 4% to 8% depending on the bank, deposit amount, and tenure.

Q5: Can I withdraw my FD before maturity?
A: Yes, but premature withdrawals usually attract penalties and may receive lower interest rates.