Fixed deposits are one of the safest investment options in India for quite a long time since its inception. By the end of the last fiscal which ended in March 2019, the number of fixed deposit accounts was pegged at nearly 58% of the total share of both fixed and savings account, as per RBI.
Fixed deposits accrue interest on simple interest rates only if the maturity tenor is 1 year and the FD itself is cumulative. The interest earned on all other fixed deposits with longer tenors or non-cumulative ones are compounded annually. You can easily get an overview of the same before investing with the help of an FD rate calculator for your convenience.
How is the interest calculated?
As already mentioned, the interest for a fixed deposit is calculated over the principal amount for the 1st year. Simultaneously, from the 2nd year, earned interest is added to the principal amount which becomes the principal for the next year. To earn higher interest, you can opt for fixed deposit interest rate comparison of various financers and choose a suitable one.
Reputed financers like Bajaj Finance offer attractive interest rates on fixed deposits for both regular account holders as well as higher interest rates only for senior citizen. However, you should know how to choose the best FD plan in 2019 according to our financial situation.
You can choose a plan where you will be disbursed with monthly payouts of the interest earned. Alternatively, you can also opt for a longer tenor and increase the corpus. Remember, the interest on fixed deposits is compound interest where you can earn more than if it were simple interest. An FD rate calculator can be helpful in such situations to calculate the interest you are about to earn on an investment.
In the latter case, the interest is earned on a yearly basis but the principal amount remains same for each year. Subsequently, you do not earn any interest on the interest earned in the previous year. The difference between these earnings is remarkably visible when you invest the same amount in both schemes for the same period.
Formula to calculate both compound and simple interest is given below –
Simple Interest = SI.
Principal amount invested = P.
Time = T in years.
Rate of interest = R.
SI = (PTR/100)
CI = P (1-(r/100)^T) – P
For both the above cases, after calculation of the interest, the principal is added to it to calculate the overall amount, known as the maturity amount. With the help of an FD rate calculator, you can see that the compound interest earned is higher than the simple interest. Only for the first year, both the interest amounts are equal.
The accounts of fixed deposit in India are higher due to this reason that you can earn more each year. As an investor, you might often wonder about should you choose fixed deposits or savings accounts. Consequently, it becomes important to choose the right investment option for you.
How to calculate maturity amount for Fixed Deposit?
Every financer has its obligation to offer a certain rate of interest, which is why you should have a comprehensive knowledge of FD interest rates 2019 before investing in any scheme. Additionally, you can choose between payouts or disbursal options related to your fixed deposit account, to suit your financial needs.
Regardless, you can avail of an FD rate calculator and choose the mode of disbursal you want – cumulative or non-cumulative.
- Cumulative: Herein, you are disbursed with the lumpsum maturity amount as the payout after the tenor period ends. It includes the sum invested along with the interest earned over the tenor.
- Non-cumulative: Here, you are disbursed with periodic payouts which can be either monthly, quarterly, half-yearly or on yearly basis.
Hence, by investing in a fixed deposit scheme, you can accrue interest on your savings. Utilise an FD rate calculator and determine the most appropriate investment option to meet your financial obligations. This will assist you in arriving at a point where you can invest for higher returns on your fixed deposit. You can also enjoy a hassle-free investment option by selecting the right financial organization.