Fixed deposits

FD interest on ₹5 lakh for 1, 3 and 5 years

Updated October 2026 · 5 min read

A ₹5 lakh FD at 7% earns about ₹35,930 in one year and ₹2.07 lakh over 5 years, when interest is compounded quarterly and paid at maturity. If you take interest every month instead, you get about ₹2,917 a month.

Interest on ₹5 lakh (paid at maturity)

Quarterly compounding means interest is added to your deposit every three months and starts earning interest itself. That's why a 7% FD actually yields about 7.19% a year.

If you want regular income

Most banks let you take interest monthly or quarterly instead of at maturity. Your deposit stays at ₹5 lakh, and you receive:

Monthly payout FDs often carry a slightly lower rate, because the interest isn't compounded. Retired people commonly use this option to cover household expenses.

Tax on FD interest

• FD interest is added to your income and taxed at your slab rate.
• Banks deduct 10% TDS if your interest from that bank crosses ₹50,000 in a year (₹1 lakh for senior citizens). With a valid PAN on record, the rate stays at 10%.
• If your total income is below the taxable limit, submit Form 15G (or Form 15H if you are 60 or older) to stop TDS.
• Even when no TDS is deducted, you must still show the interest in your tax return.

Is ₹5 lakh in one bank fully safe?

DICGC insurance covers up to ₹5 lakh per person per bank, and that limit includes interest. A ₹5 lakh FD plus its interest goes slightly above the limit. If safety matters most, split the deposit across two banks, for example ₹2.5 lakh each.