FD interest payout tips: How monthly, quarterly and cumulative differ

A ₹10 lakh FD in Punjab National Bank shows how your returns can change depending on whether you pick monthly, quarterly or cumulative interest, and how tax rules apply

Fixed deposit is a favourite with senior citizens and risk-averse investors. And who can blame them, given the ups and downs of the stock market? But do you know how the payout works and which option gives you the maximum benefit?

 

How a one-year FD pays out

 

Take the example of someone who has invested ₹10 lakh in a Punjab National Bank fixed deposit at the current rate of 6.60% for 390 days.

 

According to Adhil Shetty, CEO of BankBazaar.com, banks usually provide monthly, quarterly, and cumulative payout options.

 

Cumulative payout: If you wait till maturity, you get the full benefit of compounding for 390 days. At 6.60%, the interest on ₹10 lakh comes to about ₹71,693.

Quarterly payout: Interest is credited every three months. You would receive ₹16,500 in each quarter and ₹5,500 in the last quarter, totalling ₹71,500.

Monthly payout: The bank credits interest of ₹5,500 every month. Over 390 days, that also adds up to ₹71,500.

 

What changes over five years

 

Now, if you invest the same ₹10 lakh for five years at 6.50%, the returns look quite different.

 

“Shetty explained that the payout choice again determines how much you finally earn,” said Shetty.

 

Cumulative: Interest is added back to the principal and allowed to compound. After five years, your FD would be worth around ₹13.7 lakh — a gain of about ₹3.7 lakh.

Quarterly: Regular payouts bring you about ₹16,250 every three months.

Monthly: You would earn about ₹5,416 each month. Across five years, that adds up to roughly ₹3.25 lakh in interest.

 

“This structure suits those who value regular cash flows over compounding benefits,” said Shetty. 

 

Why cumulative matters more in the long run

 

Shetty pointed out that the returns differ only slightly in the short term, but the gap grows with time.

 

“The card rate is the annual rate; however, this is compounded monthly, quarterly, or annually. Most banks compound the interest annually and pay them out monthly or quarterly. If the compounding frequency and the tenor are close, frequent payments may work. But if the compounding frequency is higher than the tenor, the cumulative option is better,” he said.

 

For example, over 390 days, cumulative interest is ₹71,693 compared to simple payouts of ₹71,500 — a difference of less than ₹200. Over five years, though, the cumulative option gives 14% more than monthly or quarterly payouts.

 

5-year FD at 6.50% (₹10 lakh invested)

 

Cumulative: ₹13.7 lakh total (₹3.7 lakh gain)

Monthly: ₹5,416 per month, about ₹3.25 lakh in total

Quarterly: ₹16,250 per quarter, about ₹3.25 lakh in total

 

390-day FD at 6.60% (₹10 lakh invested)

 

Cumulative: ₹71,693

Monthly: ₹71,500 in total

Quarterly: ₹71,500 in total

 

Note: Figures are illustrative; actual payouts vary by bank policy.

 

Tax on FD interest

 

Interest earned on fixed deposits is taxable, with tax deducted at source once it crosses a set limit. From Budget 2025, the TDS threshold has been raised to:

 

₹50,000 for general citizens (previously ₹40,000)

₹1 lakh for senior citizens

 

Consider Luvkush, a 24-year-old from Ghaziabad, who earns ₹75,000 annually from FDs. Since the TDS limit for general citizens is ₹50,000, tax is deducted at 10% on the excess ₹25,000 — a deduction of ₹2,500.

 

“The ₹75,000 interest is added to her taxable income. If her total income is below ₹2.5 lakh, she owes no additional tax. To avoid TDS, she can submit Form 15G at the start of the financial year, declaring that her income is below the taxable limit,” said Shetty.

 

Based on data from PaisaBazaar as of September 4, 2025, here are some of the Best FD rates available:

 

Small finance banks

 

ESAF Small Finance Bank

 

Highest: 7.60% (444 days)

1 year: 4.75%

3 years: 6%

5 years: 5.75%

 

Jana Small Finance Bank

 

Highest: 8% (5 years)

1 year: 7.25%

3 years: 7.50%

5 years: 8%

 

slice Small Finance Bank

 

Highest: 8.50% (18 months 1 day–18 months 2 days)

1 year: 6.75%

3 years: 8.25%

5 years: 7.75%

 

Suryoday Small Finance Bank

 

Highest: 8.20% (5 years)

1 year: 7.50%

3 years: 7.75%

5 years: 8.20%

 

Utkarsh Small Finance Bank

 

Highest: 7.65% (2–3 years)

1 year: 6%

3 years: 7.65%

5 years: 7.25%

 

Private sector banks

 

Bandhan Bank

 

Highest: 7.20% (2–<3 years)

1 year: 7%

3 years: 7%

5 years: 5.85%

 

DCB Bank

 

Highest: 7.20% (27–<28 months; above 60–61 months)

1 year: 6.90%

3 years: 7%

5 years: 7%

 

Jammu & Kashmir Bank

 

Highest: 7.30% (888 days)

1 year: 6.75%

3 years: 6.75%

5 years: 6.50%

 

RBL Bank

 

Highest: 7.20% (2 years 1 day–3 years)

1 year: 7%

3 years: 7.20%

5 years: 6.70%

 

SBM Bank India

 

Highest: 7.50% (5 years)

1 year: 6.70%

3 years: 6.90%

5 years: 7.50%

 

Public sector banks

 

Bank of Maharashtra

 

Highest: 6.70% (366 days)

1 year: 6.20%

3 years: 6.20%

5 years: 6.10%

 

Central Bank of India

 

Highest: 7% (2222/3333 days)

1 year: 6.50%

3 years: 6.50%

5 years: 6.50%

 

Indian Bank

 

Highest: 6.70% (444 days)

1 year: 6.10%

3 years: 6.25%

5 years: 6%

 

Indian Overseas Bank

 

Highest: 6.75% (444 days)

1 year: 6.60%

3 years: 6.20%

5 years: 6.20%

 

Punjab & Sind Bank

 

Highest: 6.70% (444 days)

1 year: 6%

3 years: 6%

5 years: 6.10%