A fixed deposit held to maturity
A fixed deposit locks a sum for a set term at a rate agreed on day one. There is no market risk and no upside beyond the contracted rate, which is the whole point of the instrument.
Interest is usually compounded quarterly and paid at maturity, so the effective annual yield is slightly above the quoted rate.
The formula behind the number
Two things grow at once: the sum already invested, and each new contribution from the moment it arrives. Together they give:
Here P is the opening balance, M the monthly contribution, i the monthly return and n the number of months. The second term is why contributions made early matter more than contributions made late: each one is multiplied by growth for every month it remains invested.
Worked example: ₹100,000 for 5 years at 7%
The calculator opens on a starting balance of ₹100,000 plus ₹0 every month, at 7% a year for 5 years.
- Total paid in: ₹100,000
- Ending balance: ₹141,478
- Growth: ₹41,478, which is 41% of what you contributed
Because nothing is added along the way, the entire growth comes from compounding on the original sum.
Why the second half does the heavy lifting
At the halfway point, after 2 years, the balance is ₹119,064 — around 84% of the final figure, not half of it.
| Year | Paid in | Growth | Balance |
|---|---|---|---|
| 1 | ₹100,000 | ₹7,229 | ₹107,229 |
| 2 | ₹100,000 | ₹14,981 | ₹114,981 |
| 3 | ₹100,000 | ₹23,293 | ₹123,293 |
| 4 | ₹100,000 | ₹32,205 | ₹132,205 |
| 5 | ₹100,000 | ₹41,478 | ₹141,478 |
The growth in the final year exceeds the growth in the first, even though the rate never changed. That is compounding working on a larger base.
What starting late costs
Delay by 1 year and, contributing at the same rate, you end with ₹132,205 instead of ₹141,478. That is ₹9,557 less for ₹0 of skipped contributions — the gap is the growth those early payments would have earned.
How sensitive is this to the return
The rate is an assumption, not a fact, so it is worth seeing the range. Two points higher gives ₹156,568; two points lower gives ₹128,336. Rates on deposits move with the policy rate, so laddering across several maturities avoids locking the whole sum at a low point in the cycle.
What this calculator leaves out
Tax on the interest, which is deducted at source above a threshold, and the penalty for breaking the deposit early. Inflation is excluded, and at 7% nominal against 5% inflation the real return is thin.
Laddering instead of one deposit
Placing the whole sum in one five-year deposit locks the entire amount at one rate. Splitting it across one-, two-, three-, four- and five-year deposits means one matures every year and can be reinvested at whatever rate then prevails.
The average return is similar, but the ladder removes the risk of committing everything at the bottom of the rate cycle, and it gives you access to a fifth of the money each year without penalty.
Related calculators
- Recurring deposit calculator — the monthly-contribution version
- Real interest rate calculator — the return after inflation
- Effective rate calculator — what quarterly compounding adds