FD Formula
A = P × (1 + r/n)^(n×t)
Interest = A − P
Where: P = Principal, r = Annual rate, n = Compounding per year, t = Years
Example
$100,000 at 7% for 3 years (quarterly compounding)
A = 100,000 × (1 + 0.07/4)^(4×3)
A = 100,000 × (1.0175)^12
A = $123144 approx
Interest Earned = $23144
What compounding frequency is best?
More frequent compounding gives slightly higher returns. Monthly compounding yields a bit more than quarterly, which yields more than annual. For most FDs, the difference is small.
Is FD interest taxable?
Yes, in India FD interest is added to your income and taxed as per your tax bracket. TDS at 10% is deducted if interest exceeds $40000 ($50000 for senior citizens) in a financial year.