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: 7.25% or 0.0725), 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 7.25%, which is the FD rate Ujjivan offers for 12-month FD (as on 5 June 2026). For latest FD rates, click here.

1. Simple Interest Calculation

Using the SI formula:

• SI = (1,00,000 × 7.25 × 1) / 100
• SI = ₹7,250

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

• Maturity Amount = ₹1,00,000 + ₹7,250 = ₹1,07,250

2. Compound Interest Calculation (Quarterly Compounded)

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

• A = 1,00,000 (1 + 0.0725/4)^(4×1)
• A = ₹1,07,449.50

Your maturity amount with quarterly compounding will be ₹1,07,449.50.

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 7.55% p.a.* (*T&C apply). 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 ₹50,000 (₹1 lakh 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). This makes FDs more attractive as a long-term investment instrument.
• You can submit Form 121 to avoid TDS if your total taxable income is below the exemption limit.

A 1-year FD at 7.25% interest on ₹1 lakh can yield up to ₹7,449.50 (with quarterly compounding). This makes it a secure and rewarding option for those seeking fixed returns without market risks. While the returns are guaranteed, do keep in mind the tax implications and consider reinvesting for long-term wealth growth.

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.

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