Does anyone have a Formula to calculate the Accrued Interest for Fixed Deposits which are spread over different Financial Years?

POSTED BY Vaibhav Kini ON April 16, 2012 10:48 am COMMENTS (11)

Does anyone have a Formula to calculate the Accrued Interest for Fixed Deposits which are spread over different Financial Years?

Dear Forum,

Lets say I have several FDs which are spread over different Financial Years then is there a simple Mathematical Formula which can give me the Accrued Interest for a particular Financial Year..

Application : You can choose to not open excess FD’s incase if the Accrued Interest rate is going abpve Rs 10,000 p.a.

Warm Regards
Vaibhav Kini

11 replies on this article “Does anyone have a Formula to calculate the Accrued Interest for Fixed Deposits which are spread over different Financial Years?”

  1. Vaibhav Kini says:

    No Dear Ashal,

    I am not being blasphemous but the fact is that there was no Quarter Compounding included in the School Formula..

    No I asked two things one was a formula for calculating Comp Int and also Accrued Interest so both are different and unfortunately I have not found a single formula which can calculate the Accrued Int though there are several for calculating FD interest which are giving close answers but not accurate

    1. Dear Vaibhav, formula for calculating compounding interest ‘ll remain same –

      A = P(1+r/100)^n

      The only changes ‘ll be the values of r & n in the above formula based upon your compounding term. From the above formula you can also calculate the accrued interest.

      Thanks

      Ashal

  2. Vaibhav Kini says:

    Dear Ashal,

    But does that mean one can NEVER ( FONT – 72 – BOLD UNDERLINE) find the interest at all ..

    Its so stupid to learn SIMPLE INTERST AND COMPOUND INTEREST concepts in school Math which can never be really applied in Real LIFE

    1. Dear Vaibhav, please read your own reply, you want to calculate till the last penny. All the simple interest & compounding interest education you got was a worth but here you are asking for a composite calculation for all of your FDs.

      Thanks

      Ashal

  3. Vaibhav Kini says:

    I have tried referring to a lot of formulas on the net but in vain as none of them match the maturity amount to the penny..

    In real life, all FDs are not of even duration and they can be of some days and not just proper 1 yr etc

    1. Dear vaibhav, manual calculation is the only way out as a lot of FDs of your’s ‘ll be of odd maturities & you can’t pin point the interest.

      Thanks

      Ashal

  4. Vaibhav Kini says:

    No, Dears I am law abidding citizen and do show up all the Interest Income by collecting the FOrm 16 – Int Paid Cert duly from the bank however I choose to not go above the 10K mark to avoid the TDS but I do file my returns of whatever Income from all sources..

    Hope this clears…
    Tax Avoidance is a complete NO NO but TAX saving is not …

    Thanks but can you throw some light
    “If FD sees the whole of FY, then ans in step-1 is your annual interest. Please note that some banks or companies do the same calc on monthly basis.”

    HOw the above is done?

    I am sure gaining knowledge is definitely better…
    Do you know how to calculate the Maturity AMount for FD,RD different types of Deposit instrument

    Honestly, if I am keeping the Interest below 10k and filing it, is there still a problem?

    1. Really speaking if you keep the interest below 10k and file it is not a problem. It is even recommended in some cases because you may have other heads to decrease your taxable income (Say, companies need investment proof in January but you have a recurring insurance payment in March) so you are definitely better off paying tax and filing return than claiming a refund in the first place.

      Several FDs come with various compounding periods (monthly, half yearly, annual) which is what complicates the final calculations. Why not complain to one of the banks their calculations are incorrect than what you have arrived at so they will be forced to explain how they did the calculations in the first place if they are not entertaining you otherwise.

  5. Shirish says:

    1. Calculate interest rate * principle e.g. 25000*9.5% = Rs.2375
    2. Calculate number of days in FY for which interest is due. e.g. if you open FD on 1st Nov, then days for which interest is due will be 30+31+31+28+31 = 151
    3. Divide ans in 1 by 365 and multiply by ans in 2. e.g. (2375/365)*151= 982.5

    If FD sees the whole of FY, then ans in step-1 is your annual interest. Please note that some banks or companies do the same calc on monthly basis.

    Please note that even if you open multiple FDs in same first name in same bank, they will add all the interest amounts to determine TDS liability.

    The banks or companies are required to issue a interest certificate and TDS certificate (form 16A) to you. So you don’t have to do the calculations.

    If you are eligible for form 15G/H, you can submit the form to Banks/companies and they will not deduct tax.

  6. Dear Vaibhav, when your investments are not so simple, how can be the formula? Please answer the doubts as raised by dear Justgrowmymoney.

    Thanks

    Ashal

  7. And what are you intending to accomplish by limiting interest accruals to less than 10k each year?

    Avoid TDS so you can club it to income later and ensure there is no need for refunds [or]
    Avoid paying tax on the interest because the income is genuinely lower than the tax limits [or] Avoid paying Tax on this interest?!

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