Bank Fixed Deposit (FD) is one of the most trusted instruments among Indian investors for safe and guaranteed returns. If you are planning to deposit a lump sum amount of ₹5,00,000 (Rs 5 lakh) in the bank for a tenure of 5 years, it is important to understand the exact financial analysis of how much this amount will grow on maturity. In Indian banks, interest on FD is determined on the basis of Quarterly Compounding, that is, the interest earned every three months gets added to the principal amount, due to which the effect of returns increases significantly in the long run.
Currently most of the major public and private banks offer loans to ordinary citizens for a period of 5 years. 6.50% to 7.00% and senior citizens 7.00% to 7.50% Offer interest between Rs. The returns on a principal amount of ₹5 lakh for 5 years (compounded quarterly) are calculated below:
| Annual Interest Rate (% pa) | investor class | Total Interest Earned (₹) | Total Maturity Amount (₹) |
| 6.50% | Ordinary Citizen (Average Rate) | ₹1,90,210 | ₹6,90,210 |
| 6.75% | General Citizen (Special Rate) | ₹1,98,908 | ₹6,98,908 |
| 7.00% | General/Senior Citizen | ₹2,07,394 | ₹7,07,394 |
| 7.25% | Senior Citizen (Premium Rate) | ₹2,16,423 | ₹7,16,423 |
| 7.50% | Senior citizens (highest rate) | ₹2,24,974 | ₹7,24,974 |
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For general citizens: If the bank gives an annual interest of 6.50% to 6.75%, then a deposit of ₹ 5 lakh will grow to approximately ₹6.90 lakh to ₹6.98 lakh It will be done. That means you will get net interest benefit of approximately ₹ 1.90 lakh to ₹ 1.98 lakh.
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For Senior Citizens (60 years and above): Banks offer additional interest of 0.50% to senior citizens. At the rate of 7.00% to 7.50%, senior citizens will get approx. ₹2.07 lakh to ₹2.25 lakh Interest of up to Rs. 1000 is received, due to which the maturity fund increases. ₹7.07 lakh to ₹7.25 lakh Reaches.
While investing ₹5 lakh in FD, it is important to keep these income tax rules in mind:
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Tax Saver FD (Section 80C): If you choose a special ‘Tax Saving FD’ with a tenure of 5 years, you can claim a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. However, this FD has a mandatory lock-in of 5 years and cannot be broken midway.
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TDS Deduction: If the FD interest income in a financial year exceeds ₹40,000 for general citizens and ₹50,000 for senior citizens, the bank deducts 10% TDS (20% if PAN is not linked). The annual interest on an FD of ₹5 lakh is around ₹32,000 to ₹36,000, so if you do not have any other FD in the bank, the TDS will generally remain within the limit.
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Form 15G/15H: If your total annual income is less than the basic exemption limit, you can avoid TDS deduction by submitting Form 15G (Form 15H for senior citizens) to the bank.