How Much Interest Can You Earn on ₹1 Lakh, ₹5 Lakh, and ₹10 Lakh in a Fixed Deposit?
Fixed Deposits (FDs) are popular in India because they feel simple: you deposit money for a tenure and earn a known interest rate. But the real question most people ask is: “How much interest will I actually earn?” This guide gives you a clear way to estimate FD interest for ₹1 lakh, ₹5 lakh, and ₹10 lakh, with tables, examples, and a quick checklist.
Educational only (not financial or tax advice). FD rates and tax/TDS rules can change. Always check your bank’s latest FD rate chart and confirm tax rules for your situation.
Simple idea
An FD is just money kept for a fixed time at a fixed rate. Your interest depends mainly on: how much you deposit, what rate you get, and how long you keep it.
For exact maturity values, use the FD calculator. This article focuses on simple understanding with examples.
Quick example (easy math)
If you deposit ₹1,00,000 at 7% per year, then the “feel” of interest for 1 year is about: ₹1,00,000 × 7% = ₹7,000 (before tax).
For ₹5,00,000, it becomes about ₹35,000. For ₹10,00,000, it becomes about ₹70,000. Same rate + same time + bigger amount = bigger interest.
Always confirm your bank’s official rate and the exact compounding/payout method.
What decides FD interest in India?
Your FD interest depends on a few key inputs. If you understand these, you can estimate interest quickly—even without a calculator.
1) Deposit amount
₹1 lakh, ₹5 lakh, ₹10 lakh—interest is proportional. Double the principal → roughly double the interest (same rate/tenure).
2) Interest rate (p.a.)
Banks quote annual interest rate, but compounding/payout frequency affects the final maturity amount.
3) Tenure
The longer the tenure, the higher the interest. A small rate difference becomes big over 3–5 years.
4) Interest type
Cumulative (reinvested/compounded) usually grows more than monthly payout for the same rate and tenure.
Rule of thumb: yearly interest estimate
For a quick estimate, you can approximate one-year interest like this:
- Interest (1 year) ≈ Principal × Rate (Rate as a percentage)
- Example: ₹1,00,000 at 7% ≈ ₹7,000 for one year (before tax).
This is a helpful starting point. For multi-year FDs (especially cumulative), compounding makes the final interest slightly higher than simple multiplication. If you want the concept explained simply, read How interest really works (simple examples).
Calculate in 3 steps (the same method for ₹1L / ₹5L / ₹10L)
Step 1: Choose rate
Pick the FD rate for your tenure (banks usually show a rate chart). Even 0.5% difference matters on ₹10 lakh.
Step 2: Choose tenure
Short (6–12 months) for flexibility, medium (1–3 years) for goals, longer (3–5 years) for stable planning.
Step 3: Pick FD type
Cumulative = reinvest interest. Payout = receive interest regularly. Same rate can give different cash flow.
Comparison table: estimated interest on ₹1L / ₹5L / ₹10L
Below is a simple estimation table to help you “get a feel” for the numbers. We use commonly seen rates as examples. Your bank may offer different rates for different tenures, so treat this as a guide—not a guarantee.
| Example rate (p.a.) | Tenure | Interest on ₹1,00,000 (approx) | Interest on ₹5,00,000 (approx) | Interest on ₹10,00,000 (approx) |
|---|---|---|---|---|
| 6% | 1 year | ₹6,000 | ₹30,000 | ₹60,000 |
| 7% | 1 year | ₹7,000 | ₹35,000 | ₹70,000 |
| 7% | 2 years | ₹14,000+ | ₹70,000+ | ₹1,40,000+ |
| 7.5% | 3 years | ₹22,500+ | ₹1,12,500+ | ₹2,25,000+ |
| 7.5% | 5 years | ₹37,500+ | ₹1,87,500+ | ₹3,75,000+ |
Why “+” in multi-year rows? Because cumulative compounding can push the final interest slightly above simple multiplication. Use the FD calculator for exact maturity values based on compounding frequency.
Mini-checklist before you book an FD
Check the rules
- Premature withdrawal penalty
- Auto-renewal (on/off)
- Interest payout frequency (monthly/quarterly)
- Whether the rate differs by deposit size
Check your goal
- Need cash flow? Pick payout FD.
- Want growth? Pick cumulative FD.
- Need flexibility? Split into 2–5 FDs (laddering).
- Unsure? Keep part in savings and part in short FDs.
Cumulative FD vs monthly interest payout: which earns more?
Many Indian families choose FDs for regular income—like monthly interest for household expenses. Others choose cumulative FDs to grow money. Both can be useful, but they behave differently.
Cumulative FD (reinvestment)
- Interest is added back to FD (compounding).
- Usually higher maturity amount for same rate/tenure.
- Best for goals (emergency fund, down payment, fees).
Monthly/Quarterly payout FD
- Interest is paid out regularly to your savings account.
- Useful for cash flow (rent, bills, parents’ expenses).
- Growth depends on whether you reinvest the interest.
Worked examples: interest on ₹1L / ₹5L / ₹10L (India-style)
These examples show how your final interest changes with rate and tenure. The numbers are illustrative and rounded for clarity.
Example 1: ₹1,00,000 FD at 7% for 1 year
Simple estimate
Interest ≈ ₹1,00,000 × 7% = ₹7,000 (before tax).
Maturity ≈ ₹1,07,000 (approx).
Better estimate
If cumulative and compounded quarterly, maturity can be slightly higher than ₹1,07,000. Use FD calculator to get exact maturity.
Example 2: ₹5,00,000 FD at 7% for 2 years (cumulative)
A common use-case: people park a bonus, matured FD, or sale proceeds for 18–24 months.
- Simple interest feel: ₹5,00,000 × 7% × 2 ≈ ₹70,000 (before tax).
- Cumulative compounding can make it a bit higher than ₹70,000.
If you are deciding between FD and other options, start with the basics: Investments hub explains risk and diversification (beginner-friendly).
Example 3: ₹10,00,000 FD at 7.5% for 3 years
For bigger amounts, small rate differences matter. For instance, 7.5% vs 7.0% on ₹10 lakh is about ₹5,000 per year difference before compounding and taxes.
When comparing FDs, don’t just look at “highest rate”. Also check premature withdrawal rules, penalty, auto-renewal behavior, and whether the bank offers higher rates for seniors or specific tenures.
Where will FD interest be credited?
FD payout interest (if you choose monthly/quarterly payout) usually goes to your linked bank account—most commonly your savings account or salary account. If you use a salary account for daily spending, a payout FD can help with predictable cash flow.
If you are new to FDs, our FD page explains the basics, benefits, and limitations: Fixed Deposit (FD) account.
Tax and TDS: the “real” interest you take home
Many people calculate interest and stop there. But to understand your actual earnings, you should consider tax impact. In India, FD interest is generally treated as income and can be taxable based on your slab (rules can change).
TDS concept (simple)
TDS is a “tax deducted at source” by the bank in some cases. It is not always the final tax—your actual tax depends on your total income.
Why it matters
If you need steady monthly cash flow, a sudden TDS deduction can reduce the interest credit. Plan for it in your monthly budget using the budget calculator.
A simple way to think about it is “after-tax yield”. If your FD rate is 7% and you are in a 30% tax bracket, the effective post-tax return can feel closer to ~4.9% (very rough illustration), because interest income is taxed. This is why some people compare FD to other options when the goal is long-term growth.
| Example FD rate | Tax slab (illustrative) | Approx post-tax rate feel | Interest on ₹1,00,000 (1 year) | Interest on ₹5,00,000 (1 year) | Interest on ₹10,00,000 (1 year) |
|---|---|---|---|---|---|
| 7% | 0% (no tax) | ~7.0% | ₹7,000 | ₹35,000 | ₹70,000 |
| 7% | 20% | ~5.6% | ₹5,600 | ₹28,000 | ₹56,000 |
| 7% | 30% | ~4.9% | ₹4,900 | ₹24,500 | ₹49,000 |
Educational note: Always confirm the latest thresholds and rules. If your payroll deductions confuse you, read How to read your salary slip (CTC vs in-hand).
How banks calculate FD interest (simple explanation)
Banks usually quote FD rates as “p.a.” (per annum). The exact interest credited depends on the FD type: simple interest payout (monthly/quarterly) or compound interest (cumulative).
Monthly/Quarterly payout (easy to feel)
If your FD pays out interest, you can roughly estimate monthly interest as: (Principal × Rate) ÷ 12 (rough). Example: ₹10,00,000 at 7% → ~₹70,000/year → ~₹5,833/month before tax (rough).
These numbers are approximate because banks can use day-count conventions and different payout dates. Use FD calculator for exact.
Cumulative FD (compounding)
In a cumulative FD, interest gets added back to principal periodically (often quarterly), and then the next period’s interest is calculated on the larger base. This “interest on interest” is why maturity becomes slightly higher than simple multiplication.
If you want to understand compounding deeply, read How interest works.
FD vs RD: what if you don’t have a lump sum?
Many salaried people don’t invest ₹5 lakh or ₹10 lakh in one shot. Instead, they save every month. That’s where an RD (Recurring Deposit) can be useful. RD builds a corpus slowly, while FD is a lump sum deposit.
FD (lump sum)
- Best when you already have money (bonus, maturity, savings).
- Easy to calculate and track.
- Works well for goal dates (1–5 years).
RD (monthly)
- Best for disciplined saving from salary.
- Interest depends on deposit schedule and rate.
- Good for building FD amount over time.
Try both tools to compare: FD calculator and RD calculator. If you’re starting with salary planning, use the budget planner to set a monthly saving target.
Senior citizen FD rates: why they matter
In India, many banks offer slightly higher FD rates for senior citizens. If you’re helping your parents or planning for retirement, this “extra” rate can make a meaningful difference over 3–5 years—especially on ₹5 lakh or ₹10 lakh.
Always check eligibility rules and the current bank rate chart. For longer-term planning, you can also explore basics like risk and diversification in Investments hub (educational).
Premature withdrawal, penalties, and “hidden” rules
A big advantage of FD is simplicity, but it still has rules. Before booking a large FD, check these:
Premature break
Breaking early may reduce the interest rate and/or add penalty. Ask your bank about the penalty structure.
Auto-renewal
Some FDs auto-renew at maturity. Decide in advance whether you want renewal or payout to your account.
Interest payout dates
If you rely on monthly interest for expenses, confirm the payout date so it matches your cash-flow needs.
FD interest and inflation: what to remember
FD interest is a nominal return (it doesn’t automatically adjust for inflation). If inflation is high, the “real” growth (after inflation and tax) can be lower. This doesn’t mean FD is bad—it just means FD is best suited for stability and short-to-medium goals, not always for long-term wealth growth.
FD strategy for Indian salaried families: practical use-cases
Here are realistic ways Indians use FDs. The right choice depends on your goal and timeline—not just rate.
Emergency fund parking
Keep a portion liquid (savings) and ladder the rest into short FDs for slightly better returns.
Goal-based saving
For fees, travel, wedding, or a down payment in 1–3 years, cumulative FDs are easy to track.
Parents’ monthly support
Payout FD can send monthly interest to a parent’s savings account for expenses.
FD laddering (simple): reduce reinvestment risk
Reinvestment risk means: when your FD matures, the new rate might be lower. Laddering reduces this risk and improves flexibility.
How laddering works
Split ₹10 lakh into 5 parts of ₹2 lakh each, and create FDs with different maturities (e.g., 6 months, 1 year, 18 months, 2 years, 3 years). Every 6–12 months, one FD matures and you can reinvest based on then-current rates.
Who should use it?
Laddering is useful if you expect to need money in stages, or if you want a balance of flexibility and returns without taking high risk.
Quick calculator links
FD calculator
Enter amount, rate, tenure, and compounding to get maturity value.
RD calculator
Compare “monthly investing” (RD) vs “lump sum” (FD) for a goal.
Budget planner
Plan monthly savings so you can build FD corpus steadily.
FAQ: FD interest on ₹1L / ₹5L / ₹10L (India)
1) Which FD is better: 1 year or 5 years?
It depends on your goal and flexibility needs. Longer tenures usually earn more total interest, but you lose flexibility and may pay a penalty for early withdrawal. If you are unsure, laddering can be a practical middle path.
2) Can I break an FD before maturity?
Many banks allow premature withdrawal, usually with a penalty or reduced interest rate. Read the bank’s rules before booking the FD. If you need frequent access, keep a portion in savings.
3) Will I get monthly interest if I choose cumulative FD?
No. Cumulative FDs typically reinvest the interest and pay it at maturity. If you need monthly income, choose a payout option.
4) Is FD safe in India?
FDs are considered relatively stable compared to market-linked products, but safety depends on the institution and rules. Always choose reputed institutions and understand deposit insurance/limits as applicable.
5) How do I estimate FD interest quickly without a calculator?
Use the rule: yearly interest ≈ principal × rate. For multi-year FDs, multiply by years and remember cumulative compounding adds a little extra. For exact maturity and monthly payout amounts, use the FD calculator.
6) Is it better to put ₹10 lakh in one FD or split into multiple FDs?
Splitting into multiple FDs can improve flexibility. If you suddenly need ₹2 lakh, you can break only one FD instead of breaking the full ₹10 lakh. Laddering also reduces reinvestment risk if rates change.
7) Can I link my FD to my savings account for automatic credit?
Yes, payout FDs typically credit interest to your linked account. For cumulative FDs, the maturity amount is usually credited to your linked account at maturity. Confirm the linked account details when booking the FD.
Related guides: How interest works • Fixed vs variable interest rates • Read your salary slip