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FD Calculator: Will Your Money Double in 10 Years? Understand the Complete Math
- •Fixed deposits (FDs) are highly popular in India, offering fixed interest rates and no risk of losing money.
- •Depositing ₹1 lakh for 10 years at an annual interest rate of around 7% to 7.2% can almost double your money.
- •The power of money doubling lies in the compounding formula of cumulative FDs, where interest is added to the principal.
- •Assessing a ₹1 lakh investment at different interest rates shows a significant difference in total maturity amount after 10 years.
- •FD interest income is fully taxable, and breaking an FD prematurely can incur penalties and reduced interest rates.
Key Questions Answered
If you deposit a lump sum of ₹1 lakh into a cumulative fixed deposit for 10 years at an annual interest rate of around 7% to 7.2%, your money can almost double. At an interest rate of 7.18%, the principal turns into a full ₹2 lakh, and at a 7% rate, you receive approximately ₹2,00,160 at maturity. This growth happens due to the compounding formula of cumulative FDs, where interest is added back to the principal instead of being paid out.
In a cumulative FD, interest is added to the principal amount rather than being paid out, allowing your money to grow and double over time. Conversely, a non-cumulative or monthly payout FD sends interest to your savings account regularly for household expenses, meaning the principal never grows and you will only get back your original ₹1 lakh after 10 years.
Interest income from bank FDs is fully taxable and falls under your income tax slab, with banks deducting TDS if interest exceeds the prescribed limit. Additionally, if you break the FD before the 10-year maturity period during an emergency, the bank will deduct a penalty and reduce the interest rate, disrupting your financial calculations.
