1. What is Interest on FD?

Interest on Fixed Deposit (FD) is the return earned on the principal amount deposited for a fixed period. It represents the compensation for lending money to the financial institution.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Interest earned (currency units)
• \( A \) — Maturity amount (currency units)
• \( P \) — Principal amount (currency units)

Explanation: This formula calculates the interest earned by subtracting the original principal from the total maturity amount received at the end of the deposit period.

3. Importance of Interest Calculation

Details: Calculating interest on fixed deposits helps investors understand their returns, compare different investment options, and make informed financial decisions about their savings.

4. Using the Calculator

Tips: Enter the maturity amount and principal amount in currency units. Both values must be positive numbers, and the maturity amount should be greater than or equal to the principal amount.

5. Frequently Asked Questions (FAQ)

Q1: What is a Fixed Deposit?
A: A Fixed Deposit is a financial instrument where you deposit a lump sum amount for a fixed period at a predetermined interest rate, providing guaranteed returns.

Q2: How is FD interest calculated?
A: FD interest can be calculated using simple interest (I = A - P) or compound interest formulas, depending on the terms of the deposit.

Q3: What factors affect FD interest rates?
A: Interest rates depend on the deposit amount, tenure, type of deposit, and the financial institution's policies. Senior citizens often get higher rates.

Q4: Are there tax implications on FD interest?
A: Yes, interest earned on FDs is taxable as per income tax laws of your country. TDS may be deducted by banks in some cases.

Q5: Can I withdraw my FD before maturity?
A: Premature withdrawal is usually possible but may attract penalties or lower interest rates as per the bank's terms and conditions.