In a cumulative FD, interest is added to the balance each quarter (the Indian bank standard) and thereafter earns interest itself, so the maturity value grows faster than the simple rate suggests.

In a payout FD, the interest is credited to your account each period instead of being reinvested. The principal never changes, so every payout is identical and the maturity amount equals the original deposit.

Given: ₹500,000 for 5 years at 7.25% p.a., compounded quarterly

r/n = 0.0725/4 = 0.018125  ·  n×t = 20

A = 500,000 × (1.018125)²⁰ = 500,000 × 1.43124 ≈ ₹715,620

Interest earned ≈ ₹215,620  ·  Effective annual yield ≈ 7.45%

• Most Indian banks compound FD interest quarterly; check your bank's terms before comparing.
• Senior citizens usually receive an additional 0.25–0.75% — enter the higher rate directly.
• Interest is fully taxable; TDS applies beyond the prescribed threshold and is not deducted here.
• Premature withdrawal typically attracts a penalty of about 0.5–1% on the applicable rate.

Cumulative or payout — which pays more?
Cumulative, because interest earns further interest. Payout suits those who need regular income.

What is effective annual yield?
The single annual rate equivalent to the stated rate plus quarterly compounding — the fair basis for comparing FDs.

Is FD interest taxable?
Yes, it is added to your income and taxed at your slab rate.