HaatBeatHow it's calculated
At maturity: A = P × (1 + r ÷ k)^(k × t)
Payout: interest each period = P × r ÷ 12 (monthly) or ÷ 4 (quarterly)
P is the deposit, r the yearly rate, k the compounding periods a year (quarterly by default, as most banks use) and t the tenure in years.
Assumptions
- Interest compounds quarterly unless you choose otherwise; part periods compound proportionally.
- Payout options pay simple interest and return the deposit at maturity.
- Tax deducted at source and early-withdrawal penalties are not included.
Worked example
1 lakh rupees at 7% a year for 12 months, compounded quarterly, matures at about 1,07,186 rupees.
Questions
Why is the maturity amount higher than simple interest?
With cumulative deposits, interest is added every quarter and then earns interest itself.
Is the monthly payout exactly the yearly rate divided by 12?
This estimate uses that. Some banks discount monthly payouts slightly because the interest is paid earlier.
Does this include tax?
No. Tax deducted at source and income tax depend on your situation and country.