India witnessed an increase in value of deposits of around 9.8% in the month of April, 2022. A very popular type of saving of the common man in India is the fixed deposit. This is because the rates of interest received when money is invested in FDs is much higher than when it is invested in savings accounts. The interest that will accrue upon maturity can be calculated using a fixed deposit interest calculator. You can find this on the website of the insurance company.
Benefits of Investing in FDs
Of all the investment types available [AC(-G-E1] in India, fixed deposits provide solid security to the money you invest in these. In addition to this, there are other benefits too.
- Assurance of corpus on maturity – Investing capital in FDs means that you will receive a fixed corpus upon maturity with interest.
- Collateral against loans – FDs are a great collateral against which loans of over 90% of the FD amount can be easily availed to meet any unforeseen emergencies.
- Tax exemptions on interest – A tax exemption of up to Rs. 10,000 (Rupees ten thousand) can be claimed on the interest you receive on the fixed deposit. These are just a few of the many advantages of investing in an FD.
How Do You Calculate Interest on FD?
Fixed deposit interest calculators use two different formulae to calculate interest on FD.
- Formula for Simple Interest: SI = PRT/100
In the above formula, SI stands for simple interest; ‘P’ stands for principal amount, which is the amount of money you invest into the fixed deposit; ‘R’ refers to the rate of interest on the principal; and T refers to the duration of the fixed deposit. Let us look at an example, say for instance the P is Rs. 1,00,000 (Rupees one lakh), R is 10 and T is 10 years. Then the interest on FD that you will receive upon maturity will be as given below:
SI = (1,00,000*10*10)/100
So, SI = 1,00,000
- Formula for Compound Interest: CI = A – P
Here, CI stands for compound interest. It is calculated by subtracting the principal amount invested (P) from the amount that will be accrued upon maturity (A). But first, it is necessary to calculate the maturity amount, using the formula below:
A= P (1+r/n) ^ (n*t)
‘A’ and ‘P’ are as defined above, ‘r’ is the rate at which interest is accrued annually (decimal count), ‘n’ refers to the number of times interest will be compounded each year, and ‘t’ refers to numbers of years it will take the FD to mature. Let us calculate the CI for a principal amount of Rs. 10,000 (Rupees ten thousand), where the rate of interest is 5% i.e., 0.05 and compounded quarterly, for a total period of 4 years.
A = 10,000 (1+0.05/4) ^ (4*4)
A = 10,000 (1+0.0125) ^ (16)
A = 10,000 (1.0125) ^ (16)
A = Rs. 12,199 (approximately)
Using this we can calculate the CI as,
CI = Rs. 12,199 – Rs. 10,000
CI = Rs. 2,199 (approximately)
Why Use an Online Calculator?
With innovations in technology, calculation of interest at the time of maturity is now automated. There is no need for you to waste your precious time figuring out the answer by yourself. Now you can simply use an online fixed deposit interest calculator to calculate the interest you will receive upon maturity of your FD. Of the many reasons why you should use a FD maturity calculator, here are the most significant ones;
- Save time and energy – It goes without saying that using an online FD maturity calculator is much easier and quicker than doing the calculations yourself. Not only will the results be shown in a matter of minutes, the effort required for it is also very minimal.
- The numbers are always accurate – One can never make an inaccurate calculation while using a fixed deposit interest calculator. As it is a fully automated process, there is no scope for human error making the answer accurate, every single time.
- Helps assess the risks – By calculating the interest you will receive upon maturity; you will know beforehand what the reward for the investment will be. This will help you assess the risks involved, and see if the risks are worth the return.
- Helps choose the best plan – It is wise to use a FD maturity calculator to calculate the returns you will receive on similar FD plans offered by multiple insurance companies. This will help you see for yourself, which company has the best to offer, and pick the very best plan.
How to Use an Online Calculator?
You can avoid the confusion and effort in doing the math behind calculating the fixed deposit interest by using a fixed deposit interest calculator available online on the website of the insurance companies.
Online calculators usually ask questions like:
- If you are a senior citizen, or a non-senior citizen
- Whether the FD is cumulative or non-cumulative
- The amount invested in FD
- The duration of the FD
In addition to this, you may also be required to enter details of some variables, depending on your insurance company and the investment type. All you have to do is provide the fixed deposit interest calculator with necessary information, and within seconds you will have your answer ready!
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