Cumulative vs Non-Cumulative FD
Compare compounding growth versus regular income payouts to decide which fixed deposit type matches your financial goals.
FD Details
Cumulative FD
Maturity Returns (Growth)
₹6,15,720
Non-Cumulative FD
Regular monthly Income
₹2,900
Principal ₹5,00,000 returned at maturity
The Compounding Gap
By keeping your money locked in a Cumulative FD, you will earn ₹11,326 more in total interest compared to taking the money out monthly.
Value of Assets Over Time (Principal + Interest Generated)
Frequently Asked Questions
What is a Cumulative Fixed Deposit?
In a cumulative FD, the interest earned every quarter is re-invested (compounded) into the principal amount. You receive the principal and the total accumulated interest together solely at the time of maturity. This results in standard compounding growth.
What is a Non-Cumulative Fixed Deposit?
In a non-cumulative FD, the interest is not re-invested. Instead, it is paid out to your savings account at regular, chosen intervals (monthly, quarterly, half-yearly, or yearly). The principal amount is returned to you at maturity.
Why does the Cumulative FD earn more overall interest?
Because of 'Compounding'. In a cumulative FD, the interest earned in the first quarter starts earning its own interest in the second quarter, and so on. In a non-cumulative FD, the interest is paid out, so you only ever earn interest on the base principal amount.
Which one should I choose?
If you need a regular source of income to meet living expenses (e.g., retirees), choose a Non-Cumulative FD. If you do not need the money immediately and want to maximize your returns through compounding over time to reach a financial goal, choose a Cumulative FD.
Is there any difference in tax?
No difference in tax rules. Under both schemes, interest earned is taxable as per your income tax slab, and TDS applies if interest exceeds ₹40,000 in a year (₹50,000 for senior citizens). In a cumulative FD, you still have to pay tax on the accrued interest every year even though you haven't received it in hand.