Fixed deposits are one of the most popular and convenient  investment options in the market, due to their assured returns.  But, have you ever wondered how interest on fixed deposit amounts are calculated in banks?  How are the interest rates calculated and what factors determine the final maturity amount? Here is a guide on how to calculate returns on your Fixed Deposits.

Reinvestment deposit interest compounded quarterly

The following formula is used for calculating maturity amount for your fixed deposits-
A = P (1 + (r/400))^n

Where “A” is the maturity amount, “P” the deposit amount, “r” is the rate of interest and “n” is the number of quarters for the chosen period.

For example, if you invest Rs.2 lakh for a period of 3 years at an interest rate of 10%, putting the values in the above formula would get you:

A= 200000 x (1+(10/400)^ (4 quarters x 3 years) = Rs.2,68,978
Thus, interest earned on the deposit for 3 years period on quarterly compounded basis is Rs.68,978/-.

For the ease of calculation you can take aid of our online financial calculator, where you just need to fill the values and tenor for which you propose to keep the funds with the bank; the calculator displays the maturity value along with the rate offered by the bank for the chosen tenor.  

The factors affecting the interest earned and the maturity amount are -

  • Principal amount - The interest earned is directly proportional to the principal amount. Higher the money deposited, higher the interest.
  • Rate of interest - Higher the rate of interest, higher the interest earned.
  • Deposit type - There are two kinds of fixed deposits. Cumulative deposits (quarterly compounded) allow interests to be paid at maturity and Fixed Deposits (interest non-cumulated) allow interests to be paid monthly or  quarterly, as per your choice. Cumulative deposits enable you to earn more as the interest income is reinvested. 
    If you choose to take monthly interest the rate of interest would be discounted at the same rate and hence, the interest quantum earned is slightly less than quarterly pay- out.  If you choose quarterly interest pay out option, the formula to arrive  at  interest quantum I is PxTxR/(365@x100) where P is principal invested, T is term in days, R is rate of interest (@366 days in a leap year).
  • Senior citizen (Age >=60 years) - Senior citizen get a slightly higher rate of interest (usually 0.5% more) than others because of their dependence on interest for their livelihood. 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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Frequently Asked Questions

How can I calculate the interest on my fixed deposit?

Access our online FD calculator and enter the amount and fixed interest rate offered to you. You will get the results within seconds. 

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What is the rate of interest for fixed deposits with Kotak Bank?

The interest rate for fixed deposits with Kotak Bank varies with maturity period, deposit amount, type of depositor, etc. For instance, the rates are higher for senior citizens compared to residing Indians under the age of 60 years.

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What are the minimum amount and maximum amount I can deposit in a fixed deposit?

At Kotak, you can start a fixed deposit with a minimum amount of Rs. 5,000.There isn’t any maximum limit for the fixed deposit amount.

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Can I withdraw my FD before maturity?

Yes, we have an option for premature withdrawal from fixed deposit accounts in select cases. 

However, in that case, interest-earned will be lesser than contracted.

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At what rate is TDS deducted?

Applicable TDS rates are:


Tax Rate

Health and Education Cess


Resident Individuals & HUF




Corporate Entity




NRO/ foreign companies









As per section 206AA introduced by Finance (No. 2) Act, 2009 w.e.f. 01.04.2010, every person who receives income on which TDS is deductible shall furnish his PAN, failing which TDS shall be deducted at rate of 20% in case resident individuals and domestic companies and 31.2% (plus surcharge wherever applicable) in case of NRO/ foreign company deposits. Tax laws are subject to change and amendments from time to time which may affect above rates.

*Rate may further be increased by the surcharge wherever applicable.

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