Fixed Deposits: The Safe Haven for Indian Savers
A **Fixed Deposit (FD)** is a financial instrument provided by banks or NBFCs which offers a higher rate of interest than a regular savings account, until a given maturity date.
How FD Compound Interest is Calculated?
In India, most banks follow **Quarterly Compounding**. This means the interest you earn in the first 3 months is added to your principal, and you earn interest on that new total in the next quarter.
M = P * (1 + r/n)^(nt)
- P: Principal amount
- r: Annual interest rate (decimal)
- n: Number of compounding periods per year
- t: Time in years
Tax-Saving FDs (Section 80C)
You can also invest in 5-year Fixed Deposits to claim a tax deduction under Section 80C. However, these FDs have a 5-year lock-in period and cannot be withdrawn prematurely.
Senior Citizen Rates
Usually, senior citizens (above 60 years) get an additional 0.50% to 0.75% interest over the regular rates.