Bonus hit the account in March and I did the usual stupid thing. Left 2,00,000 in savings at 3 percent because I was busy. My uncle called and said put it in a FD for five years, you will get 7 percent times 5, that is 35 percent, 70,000 extra, easy.
He was doing simple interest in his head. Banks dont pay FDs that way if it is a cumulative deposit. Compounding eats the last interest and pays a bit more. Also a bit less than his 70,000 if you thought 7 times 5 on the nose. The board rate is yearly. The maturity is a formula.
I opened the FD Calculator and put the four boxes. That settled the argument better than a voice note.
Deposit amount, rate, years, compounding
Deposit amount is 200000. What you put in today. Not the maturity you hope for.
Interest rate (yearly) is the FD rate from the bank sheet or the app tile. I used 7 because that is a round planning number. Your bank may show 6.5 or 7.25 this week. I run those too below.
Tenure is years. 5. You can type 0.25 steps if you have a odd period. Five years is just 5.
Compounding is the dropdown. Yearly, Half yearly, Quarterly, Monthly. Retail cumulative FDs are often quarterly. That is why the default on this site is Quarterly. If your receipt says something else, pick that.
Hit Calculate. Maturity amount, Interest earned, Principal, Tenure.
This is an estimate, not an official figure. Bank can use exact days, a senior slab, or a special tranche. A few hundred rupees gap is normal.
TDS is not inside this result. If yearly interest crosses the limit they follow, they may cut tax. Gross maturity is what we show.
7 percent quarterly on 2 lakh, the number I quote
2,00,000, 7 percent, 5 years, Quarterly.
Maturity comes close to ₹2,82,956. Interest about ₹82,956.
Uncle's 70,000 was simple 7 percent times 5 on 2 lakh, which is ₹70,000, maturity ₹2,70,000. Actual quarterly compound is about ₹13,000 more than his napkin. He was low, not high. People also do the opposite mistake, they think 7 percent compound monthly for 5 years is a huge jump. It is not huge. I show that next.
Yearly compounding at 7 percent, same 2 lakh 5 years. Maturity about ₹2,80,510. Interest about ₹80,510.
Half yearly, about ₹2,82,120. Interest about ₹82,120.
Monthly, about ₹2,83,525. Interest about ₹83,525.
Quarterly versus yearly is about ₹2,446 extra on this ticket. Monthly versus quarterly is about ₹569. So yes, frequency matters. No, it will not double your money. The dropdown is for honesty, not for a miracle.
If the board says 6.5 percent and you still pick quarterly, maturity about ₹2,76,084. Interest about ₹76,084.
If you get 7.25 quarterly, maturity about ₹2,86,452. Interest about ₹86,452.
If you get 7.5 quarterly, maturity about ₹2,89,990. Interest about ₹89,990.
Senior citizen rate is not a separate mode here. If they give you 0.5 extra, type 7.5 instead of 7. Same boxes.
Payout FD, the one that sends interest to your account every month, is not this box. This is cumulative style. You get less corpus at the end if they are paying you along the way. Dont compare a monthly-payout quote with this maturity.
What people get wrong about 5 years
They use the savings rate by habit. 3 percent for 5 years on 2 lakh is a sad number. Put the FD rate.
They ignore premature break. If you break in year 2, you do not get this maturity. You get a lower rate for the period you stayed, and sometimes a penalty. This tool assumes you sit till end. If you might need the money in year 3, pick a 3 year FD or keep a chunk in a shorter one. I split 2 lakh sometimes, 1 lakh for 2 years, 1 lakh for 5, so I dont break the long one.
They forget tax. Interest is income. If you are in a slab, the 83,000 over 5 years is not all spendable extra. TDS may already have taken a cut each year. I still use the gross number to compare two banks. Tax is a second step.
They compare FD with SIP 12 percent like it is the same product. It is not. FD is a bank promise at a known rate. SIP is a market guess. I have both posts. SIP of 3,000 for 10 years and is 12 percent SIP return a safe assumption. Use FD when you need this money to still be there.
They add yearly top-up in their head. This box is one lumpsum. If you will add 5,000 a month, that is the RD Calculator, and the RD post RD of 5,000 a month for 3 years. Different formula.
If the words simple and compound still blur, simple interest and compound interest, real difference uses 1 lakh at 8 percent so the gap is visible. Uncle's napkin was simple. This FD is compound.
How I decide if 5 years is even the right lock
Five years is a long time to not touch 2 lakh if a medical bill can show up. I ask, is this money I will not need till that date. If no, I drop Tenure to 2 or 3 and accept a slightly different rate.
If yes, I still check two banks and a small finance bank rate. I type each rate in Interest rate (yearly), keep compounding Quarterly unless the receipt says else, and I compare Maturity amount. I dont chase 0.1 percent if the bank is one I dont want to deal with for a premature issue.
Reinvesting at maturity is a new FD. Dont assume today's 7 percent for the next five after that. This page only knows the years you type.
I also check what 2 lakh does in a emergency versus what the extra 83,000 means. If this 2 lakh is the only buffer, maybe a 1 year FD ladder is smarter than one 5 year brick. The calculator will happily show 5 year maturity. It will not tell you that you broke it in month 14.
Bank app can show ₹200 more. Exact days, leap years, they care. I dont fight ₹200. I fight the 70,000 napkin versus the 83,000 compound. That is a real gap.
Fill the FD page like this
Deposit amount 200000.
Interest rate (yearly) from the sheet, 7 if you are only planning.
Tenure 5.
Compounding Quarterly unless you know it is yearly.
Read Maturity amount. Then Interest earned. That interest is why you left savings.
Dont multiply 7 by 5 in your head and call it done. Dont use a SIP return in this rate box. Dont put monthly deposits here.
2 lakh for 5 years at 7 percent quarterly is about ₹2.83 lakh back if you dont break it. That is the sentence I sent uncle. He still likes his napkin. I like the four boxes.