How Much FD Returns Would You Get If You Invest ₹1 Lakh for 1 Year?

Fixed Deposits (FDs) are one of the safest and most predictable investment options in India. Whether you are a risk-averse investor or simply looking for stable returns, an FD offers security along with assured earnings. If you are considering investing ₹1 lakh in a 1-year FD, let’s break down how much you will earn by the end of the tenure.

Understanding FD Interest Calculation

FD interest can be calculated using two methods:

1. Simple Interest (SI): Interest is calculated only on the principal amount. Formula: SI = (P × R × T) / 100
2. Compound Interest (CI): Interest is calculated on both the principal and previously earned interest. Formula: A = P (1 + r/n)^(n*t), where A = Maturity Amount, P = Principal (₹1,00,000 in this case), r = Annual Interest Rate (Example: 7.90% or 0.079), n = Number of compounding periods per year (compounded quarterly means 4), t = Tenure in years

Returns on ₹1 Lakh in a 1-Year FD

Let's analyse both simple and compound interest scenarios. For your understanding, we have kept the FD interest rate at 7.90%, which is the FD rate Ujjivan offers for 12-month FD (as on 24 April 2025). For latest FD rates, click here.

1. Simple Interest Calculation

Using the SI formula:

• SI = (1,00,000 × 7.90 × 1) / 100
• SI = ₹7,900

At the end of 1 year, your total amount will be:

• Maturity Amount = ₹1,00,000 + ₹7,900 = ₹1,07,900

2. Compound Interest Calculation (Quarterly Compounded)

Most banks compound interest quarterly, i.e., n = 4. Using the CI formula:

• A = 1,00,000 (1 + 0.01975/4)^(4×1)
• A = 1,00,000 × (1.01975)^4
• A ≈ 1,08,103.

Your maturity amount with quarterly compounding will be ₹1,08,103 meaning you will earn an interest of ₹8,103.

Disclaimer: The above example is for illustration purpose only. Ujjivan SFB does not take any responsibility for the accuracy of the information. Please use a Fixed Deposit Returns Calculator or consult with a financial expert for better understanding.

Comparison of Returns: Simple vs. Compound Interest

Benefits of Investing in Fixed Deposits (FDs)

FDs offer several advantages that make them an attractive investment option:

1. Higher and Guaranteed Returns

It’s a myth that FD offers lower rates. If you invest in Ujjivan FD, you can earn up to 7.75% p.a.* Ujjivan offers one of the best FD rates and multiple products tailored for your financial goals. Also, unlike stocks or mutual funds, FD returns are fixed and unaffected by market fluctuations, ensuring stable earnings. *T&C apply.

2. Low-Risk Investment

FDs are one of the safest investment options, making them ideal for risk-averse individuals looking for capital protection.

3. Flexible Tenure

Banks offer FD tenures ranging from 7 days to 10 years, allowing you to choose based on your financial goals.

4. Liquidity Through Premature Withdrawal or Loans

• You can prematurely withdraw an FD in case of emergencies (with a minor penalty).
•  You can also avail loans against FDs at lower interest rates, avoiding the need for high-interest personal loans.

5. Higher Interest Rates for Senior Citizens

Ujjivan offers additional 0.50% interest for senior citizens, making FDs even more rewarding for retirees.

6. Tax Benefits on Special FDs

• Tax-Saver FDs (5-year lock-in) provide tax deductions under Section 80C (up to ₹1.5 lakh per year).

7. Easy and Hassle-Free Investment

• Opening an FD is quick and straightforward, with online and offline options.

Tax Implications on FD Interest

• The interest earned on FDs is taxable as per your income tax slab.
• If your total interest exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year, TDS (Tax Deducted at Source) at 10% is deducted by the bank (20% if PAN is not provided). Please note that this TDS exemption limit is valid only till March 2025. For FY 2025-26, the exemption limit has been extended to ₹50,000 for regular citizens and ₹1 lakh for senior citizens. This makes FDs more attractive as a long-term investment instrument.
• You can submit Form 15G (for non-senior citizens) or 15H (for senior citizens) to avoid TDS if your total taxable income is below the exemption limit.