Fixed deposits or FDs are a popular investment avenue in India used by millions to earn regular interest income. FDs offer guaranteed returns and capital safety for risk-averse investors. They are available with a wide range of tenures from 7 days to 10 years. When opening an FD, it is very useful to use a fixed deposit calculator. This online tool helps you estimate FD returns tailored to your investment preferences. Read on to know key reasons why you should use an FD calculator.
1. Calculates Projected Returns
The primary benefit of using an FD calculator is that it forecasts the maturity amount you will get on your deposit. You just have to enter details like deposit amount, tenure, payout frequency and expected interest rate. The calculator does complex interest calculations to show maturity value and projected returns. For instance, on Rs 5 lakh FD for 5 years at 7% interest, the calculator estimates a maturity corpus of Rs 6.7 lakhs. Knowing returns in advance allows informed investment decision-making.
2. Compares Interest Rates and Tenures
FD calculators allow you to simulate returns at different interest rates and tenures. For example, you can input the rates. to compare returns. Likewise, you can assess returns for tenures from 1 year to 5 years. This helps choose the best FD in terms of optimal interest rate and tenure. The calculator shows how even small variations in rates can impact returns over long tenures. You get to make a well-informed FD investment picking highest return option.
3. Estimates Regular Interest Payouts
Unlike cumulative FDs where interest is compounded, regular or monthly income FDs offer periodic interest payouts. The FD calculator estimates the interest amount you will receive on monthly or quarterly basis. This assists financial planning as you can factor in this inflow to cover expenses. For retirees, knowing regular payouts helps in planning expenses and withdrawals.
4. Accounts for Taxes on Returns
FD interest is subject to tax deduction at source or TDS above a threshold. The calculator factors in TDS and shows post-tax returns on your deposit. This allows you to estimate the net effective yield after accounting for taxes. Comparing post-tax returns gives a realistic picture rather than just gross pre-tax yields. You can then choose the FD provider that delivers the highest post-tax income.
5. Models Renewal Impacts
FDs provide the option of renewal on maturity at prevailing rates. The calculator shows the maturity amount on renewal with the applicable new interest rate. This helps you assess returns if you were to extend the FD after the first tenure. Modelling renewal impact is useful for long-term deposit planning. The reinvestment returns projected gives a holistic view beyond just the first tenure.
Conclusion
Fixed deposit calculators offered by portals like 5paisa provide numerous benefits that help choose the ideal FD. By factoring key parameters and applying complex formulas, the recurring deposit calculator provides a mathematical method for maximizing FD returns. Usage of FD calculators equips you to achieve optimal interest income, tenure, liquidity and post-tax yields on your capital. You can make your FD work harder for you through intelligent usage of this tool.