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Decoded: How Much Should You Invest in a Fixed Deposit to Earn ₹1 Lakh

July 23, 2025

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Let’s assume you invest ₹70,000 in a Fixed Deposit for a tenure of 5 years at an interest rate of 7.20%. Considering you have cumulative FD, where interest pay-out would happen only at the end of the FD tenure, i.e., 5 years – upon calculation , your ₹70,000 deposit would grow to approximately ₹₹1,00,012. But does that mean you have earned ₹1 lakh? No.

The interest you have earned on your FD is the ₹1,00,012 - ₹70,000 = ₹30,012. So, how much should you invest in a Fixed Deposit and for what tenure to earn ₹1 lakh interest. Keep scrolling to know more.

Understanding Fixed Deposit Interest Pay-Outs

When you open an FD account, you have the option to choose from interest pay-out frequency, which could be monthly, quarterly, at maturity. If you opt for periodic interest pay-outs i.e., monthly or quarterly, the interest earned does not get compounded without being added to the principal amount. Hence, for non-cumulative FDs simple interest calculation method is used. To be honest, without compounding, it’s difficult to grow your money quickly. That said, those seeking regular interest income from FDs can select periodic interest pay-outs (non-cumulative Fixed Deposits).

In this blog, we will primarily focus on cumulative Fixed Deposits, where interest pay-out happens at the time of FD maturity.

Calculations

We will consider different tenures and investments to calculate your interest earnings. To calculate in a hassle-free way, we have used Ujjivan Fixed Deposit Returns Calculator.

Scenario 1

Let’s assume you invest ₹2,40,000 lakh in Fixed Deposit for a tenure of 5 years. The interest rate applicable for a 5-year is 7.20% (check with your bank for the latest FD rates). Considering you have opted for interest pay-out at the time of FD maturity, your interest earnings would be ₹1,02,899.

Scenario 2

Interest pay-out remains the same. But assume that you invest ₹2,15,000 in Fixed Deposit for a tenure of 6 years. The applicable interest rate for a 6-year FD is 6.50% (check with your bank for the latest FD rates). Your interest earnings would be ₹1,01,557.

It’s important to consider the tenure and applicable interest rate before booking an FD.

Disclaimer: The above example is for illustration purpose only. Ujjivan Small Finance Bank doesn't take any responsibility for the accuracy of information. To check Ujjivan Fixed Deposit interest rates, click here.

Why Choose Ujjivan for Fixed Deposit?

Higher Interest Rates
Ujjivan offers one of the best FD interest rates in the market. Thanks to the power of compounding, your savings grow faster if parked in Ujjivan Fixed Deposit.
Select Tenure of Your Choice
For regular and callable FDs, the FD tenure ranges from 7 days to 10 years. You have the flexibility to select the tenure of your choice that aligns with your financial goals.
Low-Risk Investment
Unlike investment instruments like mutual funds, where your wealth growth is directly linked to market performance, FDs are not market-linked and offers guaranteed returns. Also, investments up to ₹5 lakh is insured under DICGC per depositor per bank.
Book an FD From Anywhere
Ujjivan offers Digital Fixed Deposit. As the name suggests, you can open your FD from anywhere. Just ensure to keep your PAN and Aadhar card in handy for Video KYC.
Tax Saving Option
If you’re seeking tax saving investment options, Tax Saver FDs is one option you can consider. With tax-saver FDs, you can claim tax deduction up to ₹1.5 lakh under Section 80C of the Income Tax Act.
100% Safe and Secure
Ujjivan is regulated by the Reserve Bank of India (RBI). Your investment is completely safe with Ujjivan.

Final Thoughts

Ideally, you should stay invested for the long-term to maximise your returns. FD interest is compounded quarterly, meaning the accrued interest keeps earning interest, added to the principal and is reinvested. This helps you grow your money faster.

Looking to grow your savings faster? Ujjivan SFB offers a wide range of fixed deposit products. Select the FD of your choice and take a step forward to your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.

Disclaimer:

The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by the you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user’s own risk. Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness for any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.

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FAQs

1. What is a Fixed Deposit (FD)?

A Fixed Deposit (FD) is a financial instrument offered by banks and non-banking financial companies (NBFCs), where you invest a lump sum for a fixed tenure at a predetermined interest rate. The interest is higher than savings accounts, and the principal is returned along with accrued interest at maturity.

2. How is the interest rate on FD determined?

Interest rates on FDs vary based on factors like tenure, deposit amount, and the bank's policies. Banks often offer higher rates for longer durations and to senior citizens. Rates are periodically reviewed based on market conditions and RBI policies.

3. What is the minimum and maximum tenure for an FD?

The minimum tenure for an FD is usually 7 days, while the maximum tenure can extend up to 10 years, depending on the bank or NBFC. Longer tenures generally offer better interest rates, but premature withdrawals may attract penalties.

4. Can I withdraw my FD before maturity?

Yes, premature withdrawal are allowed for FDs, but it usually comes with a penalty. Ujjivan doesn’t charge any penalty for withdrawals made after 6 months from the time of deposit.

5. What is the difference between cumulative and non-cumulative FD?

In a cumulative FD, interest is compounded periodically (generally quarterly) and paid at maturity, offering higher returns. In a non-cumulative FD, interest is paid at regular intervals (monthly, quarterly, half-yearly, or annually), making it suitable for those needing periodic income.

Decoded: How Much Should You Invest in a Fixed Deposit to Earn ₹1 Lakh