Monthly interest on an FD, or cumulative? How each pays, with the arithmetic and TDS
The short answer. Yes. A non-cumulative FD pays its interest into your account every month or quarter and returns the deposit unchanged; a cumulative FD adds the interest to the deposit and pays it all at maturity. ₹10 lakh at 7% pays ₹5,799.50 a month, slightly less than ₹10 lakh × 7% ÷ 12 = ₹5,833.33, because monthly interest reaches you before the quarter ends.
Cumulative and non-cumulative: what the two words mean
A cumulative FD adds each quarter's interest to the deposit, so the next quarter's interest is earned on a larger balance, and pays everything at maturity. A non-cumulative FD, also called a payout FD, pays the interest out every month or every quarter and returns exactly the amount deposited. The FD Interest Calculator opens on the monthly payout; the FD Calculator shows the cumulative maturity.
The formula for each
With P the deposit and r the yearly rate as a fraction (7% is 0.07):
| How the interest is taken | Formula | ₹10 lakh at 7% |
|---|---|---|
| Every quarter | P × r ÷ 4 each quarter | ₹17,500 |
| Every month | P × r ÷ (12 + r) each month | ₹5,799.50 |
| Cumulative, after n years | P × (1 + r ÷ 4)^(4 × n) | ₹14,14,778 after 5 years |
Why the monthly figure is lower: banks earn FD interest by the quarter, and the first two monthly payments of each quarter arrive one and two months early. The bank discounts each by a month's simple interest for every month it is early, so the three are worth exactly one quarter's ₹17,500: M × (1 + 2r ÷ 12) + M × (1 + r ÷ 12) + M = P × r ÷ 4, which gives M = P × r ÷ (12 + r).
The same ₹5 lakh three ways, 5 years at 7%
7% is an example rate, close to large banks' one-to-five-year card rates in 2026. Use your own bank's rate in the calculator.
| How the interest is taken | Each payment | Interest over 5 years | Paid back at the end |
|---|---|---|---|
| Cumulative, compounded quarterly | none until maturity | ₹2,07,389 | ₹7,07,389 |
| Quarterly payout | ₹8,750 × 20 | ₹1,75,000 | ₹5,00,000 |
| Monthly payout | ₹2,899.75 × 60 | ₹1,73,985 | ₹5,00,000 |
Why the payout total is lower, and by how much.
- Cumulative earns ₹33,404 more than monthly payouts and ₹32,389 more than quarterly ones. Interest left in the deposit earns interest itself: ₹35,930 in year 1, rising to ₹47,424 in year 5, an effective 7.19% a year. A payout deposit earns the same ₹35,000 (quarterly) or ₹34,797 (monthly) every year.
- Monthly earns ₹1,015 less than quarterly over the 5 years, ₹203 a year: the price of getting two of every three months' interest early.
- The payouts reach your account sooner. What they earn after that depends on where they go; the table counts only what the deposit itself pays.
How much a month on common amounts
At the same example rate of 7%:
| Deposit | Paid every month | Paid every quarter |
|---|---|---|
| ₹1 lakh | ₹580 | ₹1,750 |
| ₹5 lakh | ₹2,900 | ₹8,750 |
| ₹10 lakh | ₹5,800 | ₹17,500 |
| ₹25 lakh | ₹14,499 | ₹43,750 |
| ₹50 lakh | ₹28,998 | ₹87,500 |
| ₹1 crore | ₹57,995 | ₹1,75,000 |
Senior citizens usually get 0.5 point more, though the extra differs by bank. At 7.5%, ₹10 lakh pays ₹6,211 a month or ₹18,750 a quarter. The FD Calculator for Senior Citizens adds the extra your bank quotes.
TDS on a cumulative and a payout FD
FD interest is taxed at your slab rate whether it is paid monthly or at maturity. The bank deducts TDS of 10% (20% without a PAN) once a tax year's interest from all your deposits at that bank passes ₹50,000, or ₹1,00,000 for a senior citizen, and then on the whole interest, not only the part above the limit. On a cumulative FD it counts the interest as it accrues each year, not only at maturity.
On the ₹5 lakh above, no year passes ₹50,000 either way: the cumulative deposit's largest year is ₹47,424. Because cumulative interest grows, it reaches the limit first. The FD TDS Calculator, taking the deposit's years as tax years, puts the largest 5-year cumulative deposit at 7% with no TDS at ₹5,27,154 below 60 and ₹10,54,309 for a senior citizen; on payouts below 60 the limit is reached at about ₹7.18 lakh (monthly) or ₹7.14 lakh (quarterly). If the tax on your estimated income for the year is nil, a declaration stops the deduction: from 1 April 2026 this is Form 121, which replaced Forms 15G and 15H.
How to set it up and check the figure
- Ask for the monthly or quarterly payout (non-cumulative) option, or the cumulative option, when you open the FD.
- Note the rate on the receipt for that tenure, and whether you are getting the senior citizen rate.
- Open the FD Interest Calculator, enter the deposit, the rate and the tenure.
- Read "Interest paid every month" and the total over the term. Switch to Every quarter, or to Cumulative, to compare.
Odd tenures. A tenure that is not a whole number of months, such as 1 year and 15 days, pays the 12 monthly amounts and then the interest for the 15 left-over days at maturity: on ₹10 lakh at 7%, ₹2,877, so ₹10,02,877 comes back at the end.
If the bank's figure is different. Banks count actual days and round each payment their own way, so a few rupees' difference is normal; some pay simple interest on deposits shorter than six months; and the figures here are before TDS.
Questions people ask
Can we get monthly interest on an FD?
Yes. Most banks offer a monthly payout, or non-cumulative, fixed deposit that pays interest into your savings account every month and returns the full deposit at maturity. It is chosen when the FD is opened. ₹10 lakh at 7% pays ₹5,799.50 a month, which is ₹69,594 over a year.
Why is monthly FD interest less than the yearly interest divided by 12?
Banks earn FD interest by the quarter. A monthly payout pays two of every three months' interest early, so the bank discounts each early payment: monthly interest = P × r ÷ (12 + r). ₹1,00,000 at 7% pays ₹579.95 a month rather than ₹583.33, and the three payments add up to one quarter's interest.
How does a cumulative FD calculator work out the maturity?
It adds each quarter's interest to the deposit and works out the next quarter's interest on the new balance: maturity = P × (1 + r ÷ 4)^(4 × years). ₹5 lakh at 7% for 5 years matures at ₹7,07,389, so the interest is ₹2,07,389, an effective 7.19% a year. Days left over after the last full quarter earn simple interest.
How is the quarterly payout on an FD calculated?
Each quarter's payout is simple interest on the deposit: P × r ÷ 4. ₹5 lakh at 7% pays ₹8,750 a quarter, ₹35,000 a year and ₹1,75,000 over 5 years, and the ₹5 lakh comes back at maturity. That is ₹1,015 more than monthly payouts over the same 5 years and ₹32,389 less than a cumulative deposit.
How is FD interest taxed for a senior citizen?
It is added to income and taxed at the slab rate, whether paid monthly or at maturity. The bank deducts TDS of 10% only once a tax year's interest at that bank passes ₹1,00,000, the senior citizen limit since April 2025. When the year's tax is nil, Form 121, which replaced Form 15H from 1 April 2026, stops the deduction.
Sources
- Every payment, total and maturity value here is calculated with the FD Calculator's own functions (monthly payout P × r ÷ (12 + r), quarterly payout P × r ÷ 4, quarterly compounding), rounded to the rupee where shown; checked 15 Oct 2026, the ₹5 lakh comparison added 23 Oct 2026.
- The 7% rate and the 0.5-point senior citizen extra are the calculator's example rates, not any bank's; the Reserve Bank of India's directions on interest rates on deposits leave the rate to each bank.
- TDS as the FD TDS Calculator states it, last checked 29 Sep 2026: Income-tax Act, 2025, section 393(1) for the ₹50,000 and ₹1,00,000 limits (₹40,000 and ₹50,000 until 31 March 2025); 10% under the rates in force in the Finance Act, 2026, 20% without a PAN under section 397; Form 121 under the Income-tax Rules, 2026.