Fixed Deposits (FDs) are a popular savings tool in India. These offer a secure and reliable way to grow one’s savings over a fixed period. With a predefined interest rate, FDs provide assured returns. This makes them a favoured choice for risk-averse investors.
An essential tool to optimise the benefits of this instrument is an FD calculator. This tool helps investors estimate the returns on their investments accurately. Here are 7 reasons why you should use an FD calculator before investing in an FD.
Accurate Estimation of Returns
One of the primary reasons to use this calculator is to get an accurate estimate of your FD returns. An FD calculator allows you to input the principal amount, interest rate, and tenor. It uses this information to calculate the maturity amount. This eliminates the need for manual calculations, which could be prone to errors. The calculator will show the maturity amount within a few seconds.
Comparison of Different FDs
FD calculators are invaluable when comparing the FD rates in India offered by different issuers. These are usually based on the tenor and the investor’s profile. For example, senior citizens are usually offered 0.25% p.a. to 0.50% p.a. higher rates than those provided to those below 60 years of age.
You can input the details for different FDs into the calculator. The tool instantly calculates the maturity amounts, which you can compare. This helps you find an FD that fits in your budget and aligns with your financial goals.
For example, let’s compare these FD options with different interest rates and tenors:
Calculating these figures using a calculator is much more efficient and time-saving. Within minutes you can calculate the returns of various FD options. You can then use the values to find an offer that suits your needs. For example, if high interest is your goal, then option 3 might be an ideal choice.
Understanding Interest Payout Options
FDs offer various interest payout options, such as monthly, quarterly, half-yearly, and annual. Some offer the entire sum at maturity. An FD calculator can help you understand the impact of the interest payout frequency on your returns.
For instance, opting for a monthly interest payout might provide a regular income. This could be useful for retirees. You can calculate the payout amounts beforehand to plan your finances accordingly. You can also compare the various payout options to find the frequency that aligns with your needs. Let’s understand this better with an example:
Assume you wish to book an FD for 5 years at an interest rate of 9% p.a. Let’s say the amount to be deposited is ₹2 Lakhs. Here’s a comparison using an FD calculator for different payout frequencies:
Planning for Financial Goals
An FD calculator helps in planning for specific financial goals. It helps you calculate the amount you need to invest to achieve a desired maturity amount. For example, assume you need ₹5 Lakhs in 5 years for your child’s education. In this case, you can use the calculator to determine the principal amount and interest rate required to achieve this goal. This enables you to align your savings strategy with your long-term financial goals.
Adjusting for Interest Rate Changes
Interest rates for FDs are subject to change based on certain conditions, like issuer policies. Also, the monetary policy changes by the Reserve Bank of India (RBI) could also affect the FD rates in India. An FD calculator can help you understand the impact of these changes on your investment. By adjusting the interest rate in the calculator, you can see how a hike or cut in rates would affect your returns. This enables you to make timely decisions, such as reinvesting or breaking an FD.
Assessing Tax Implications
Interest earned on FDs is taxable under the Income Tax Act, 1961. An FD calculator can help you assess the tax implications of your investment. By knowing the interest amount, you can estimate the tax liability based on your income tax slab. This information is crucial for tax planning. It ensures that your post-tax returns meet your financial expectations.
Ease of Use and Accessibility
You can easily access an FD calculator online. Most issuers provide FD calculators on their websites. Similarly, financial marketplaces like Bajaj Markets provide easy access to this user-friendly tool. This makes it convenient for investors to use them anytime.
The simplicity of these calculators ensures that even beginners can use them. This ease of use encourages more informed and calculated investment decisions.
Using an FD calculator is a smart way to manage your investments in FDs. It provides accurate estimations, facilitates comparison, and more. By leveraging such calculators, make well-informed decisions that maximise your FD returns.
An FD calculator is an indispensable tool for optimising your fixed deposit investments. It simplifies the process of planning and comparing FDs. This ensures that you can make the most of this secure savings tool.
