FD Interest Calculator: How much will an FD of ₹1 lakh be worth after 10 years? Understand the full interest breakdown..

FD Interest Calculator: If you have a lump sum of ₹1 lakh and wish to invest it for 10 years, a Fixed Deposit (FD) could be a suitable option—especially given the significant volatility in the stock market. However, simply looking at the interest rate isn't enough; it is also important to understand how interest accrues and what your investment could grow to over a decade.

Suppose you earn an annual interest rate of 7% on a 10-year FD. If it is a cumulative FD where the interest is reinvested into the deposit, you benefit from compounding. In this scenario, an initial investment of ₹1 lakh could grow to approximately ₹2 lakh after 10 years.

How much will the investment grow at different interest rates?

Assuming a 10-year tenure and quarterly compounding, an investment of ₹1 lakh could grow to the following amounts at various interest rates:

Annual Interest Rate | Amount after 10 Years | Total Interest Earned

         6%                            | ₹1.81 lakh                   | ₹81,400
         7%                            | ₹1.91 lakh                   | ₹90,600
         7%                            | ₹2.00 lakh                   | ₹1.00 lakh
         7.50%                       | ₹2.10 lakh                   | ₹1.10 lakh
         8%                           | ₹2.21 lakh                  | ₹1.21 lakh

This calculation demonstrates that even a small difference in interest rates can significantly impact the final amount over the long term. For instance, earning 8% interest instead of 6% could result in an additional ₹39,400 after 10 years.

What is the benefit of compounding?

In a cumulative FD, the interest is not paid out to your account regularly; instead, it is reinvested into the deposit. Consequently, interest for the subsequent cycle is earned on the principal amount *plus* the accumulated interest.

This is compounding. Its impact becomes increasingly evident over a long period. Therefore, when choosing a Fixed Deposit (FD), one should consider not just the initial interest rate, but also the interest payout structure and the compounding method.

What if you want monthly interest?

If your goal is to generate monthly income, an FD with a monthly interest payout option is a suitable choice. With this option, the interest is credited to your bank account at regular intervals.

In this scenario, the interest is not reinvested into the FD. Consequently, the maturity amount received after 10 years will differ from that of a cumulative FD. In exchange, however, you receive regular interest payments throughout the investment tenure.

Things to consider before opening a 10-year FD

When opting for a long-term FD, you should look beyond the interest rate and consider other terms and conditions as well. Factors such as whether the FD is cumulative or offers monthly payouts, the rules regarding premature withdrawal, and the interest earned upon early closure can all impact your returns.

Interest earned on an FD is taxable. It may be subject to tax based on your income tax slab; this is another factor you should keep in mind.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.