What You Earn from a ₹1 Lakh Fixed Deposit in 1 Year


Fixed Deposits (FDs) have long been a popular investment choice for those seeking a safe and reliable way to grow their money. By investing ₹1 Lakh in an FD for a 1-year tenure, you could earn a decent return, depending on the interest rates offered by different banks and Non-banking Financial Companies (NBFCs).


To illustrate the potential earnings, let's compare the ₹1 Lakh FD interest for 1 year across some of the top banks and NBFCs in India:


Bank / NBFC 

Interest Rate (p.a.)

Interest Earned at Maturity 

Bajaj Finance 

7.65% 

₹7,650

Shriram Finance 

8.09% 

₹8,090

Mahindra Finance 

7.75% 

₹7,750

PNB Housing Finance 

7.75% 

₹7,750

Ujjivan Small Finance Bank 

8.75% 

₹8,750

YES Bank 

7.75% 

₹7,750


Note: The above interest rates are valid as of 10th September 2024 and subject to change at the discretion of the bank or NBFC. 


As you can see, the interest earned on a ₹1 Lakh FD for 1 year varies depending on the interest rate offered by each financial institution. If you wish to manually calculate the interest earned, you can use the simple interest formula: 


Interest=P×R×T/100


For example, if you invest ₹1,00,000 in an FD with a bank at 7% p.a. interest for 1 year, the interest earned would be: 


Interest=1,00,000×7×1100=₹7,000


Here, 

  • P = Principal amount (₹1,00,000)

  • R = Rate of interest (e.g., 7% p.a. = 7)

  • T = Tenure (1 year)


So, after 1 year, you would receive the principal amount of ₹1,00,000 plus the interest earned of ₹7,000, totaling ₹1,07,000.


It's important to note that the interest earned on FDs is taxable. However, you can claim tax exemption on the interest earned up to ₹10,000 per year under Section 80TTA of the Income Tax Act, 1961. If you are a senior citizen, you can claim an exemption up to ₹50,000 per year under Section 80TTB.


When comparing bank FD rates, it's crucial to consider factors such as its credibility, the minimum deposit amount, and any penalties for premature withdrawal. Some banks may offer higher interest rates but have stricter withdrawal policies or higher minimum deposit requirements.


Another factor to consider is the compounding of interest. Some banks offer the option of monthly, quarterly, or annual compounding, which could significantly impact your overall returns. For example, if you invest ₹1 Lakh in an FD at 7% p.a. interest with monthly compounding, your total earnings after 1 year would be ₹7,092.


To illustrate the difference, compare the interest earned on a ₹1 Lakh FD at 7% p.a. interest for 1 year under different compounding scenarios:


Compounding Period

Interest Earned 

Monthly 

₹7,092

Quarterly 

₹7,054

Annual 

₹7,000


Note: The above table is for illustrative purposes only. The actual returns may vary. 


As you can see, monthly compounding yields the highest interest earnings, while simple interest and annual compounding result in the lowest earnings.


In conclusion, investing ₹1 Lakh in a fixed deposit for 1 year could provide a decent return, depending on the interest rate offered by the financial institution. By comparing rates, considering compounding periods, and factoring in your financial goals and tax implications, you could choose the best FD option to grow your savings.


Remember, while FDs are generally considered low-risk investments, it's always wise to diversify your portfolio and consider other investment options that align with your risk tolerance and long-term financial objectives.
Location: India

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