FD Rates: How much will you get after 1, 3, and 5 years if you invest ₹5 lakh in an FD? Understand the full calculation..

If you have ₹5 lakh and wish to invest it for a fixed period, a bank Fixed Deposit (FD) can be a good option. In an FD, money is deposited for a set tenure, and the bank pays interest on the amount. However, before opening an FD, it is important to understand how much your money will grow and over what timeframe.

Let us look at SBI's interest rates to understand the potential returns on a ₹5 lakh FD over periods of 1 year, 3 years, and 5 years.

How much will a ₹5 lakh FD yield in 1 year?

Suppose you open a ₹5 lakh FD with SBI for one year. The annual interest rate for this tenure is 6.25%. With quarterly compounding, the interest earned over a year would be approximately ₹31,990. This means that after one year, you would receive a total of around ₹5,31,990.

How much will a 3-year FD yield?

If you open a ₹5 lakh FD for three years, your deposited amount grows along with the interest—a process known as compounding. At an annual interest rate of 6.30% for a three-year SBI FD, the interest earned over three years would be approximately ₹1,03,131. Consequently, the total amount at maturity would be around ₹6,03,131.

How much interest will a 5-year FD earn?

Now, let’s consider a five-year FD. Keeping your money deposited for this duration allows you to earn interest over a longer period. Assuming an annual interest rate of 6.05% for an SBI five-year FD, the interest earned—based on quarterly compounding—would be approximately ₹1,75,088. This means the total amount after five years could reach around ₹6,75,088. Breakdown of a ₹5 Lakh FD

FD Tenure    Deposit Amount    Estimated Interest    Total Amount at Maturity
1 Year            ₹5,00,000                ₹31,990                      ₹5,31,990
3 Years          ₹5,00,000                ₹1,03,131                    ₹6,03,131
5 Years           ₹5,00,000               ₹1,75,088                   ₹6,75,088
Note: The calculations are based on SBI's indicative interest rates and quarterly compounding. Actual amounts may vary depending on the FD opening date and the bank's terms and conditions. Taxes and TDS are not included.

Things to Consider Before Opening an FD

It is important to check the bank's interest rates before opening an FD, as rates can vary based on the tenure. Also, consider the potential penalty for premature withdrawal. If you might need funds midway, instead of depositing the entire amount into a single FD, you could opt for multiple FDs with varying tenures.

Interest earned on an FD may be subject to tax. Therefore, do not make a decision based solely on the maturity amount; consider the net amount remaining after taxes.

Which FD is Better: One-Year, Three-Year, or Five-Year?

The answer depends on your specific needs. If you might require funds within a year, a short-term FD could be suitable.

Conversely, if you do not intend to withdraw the money for three or five years, you can compare the total interest earned on long-term FDs. When making a decision, consider not only the interest rate but also your financial requirements and liquidity needs.

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