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Compare compounding growth versus regular income payouts to decide which fixed deposit type matches your financial goals.
Maturity Returns (Growth)
₹6,15,720
Regular monthly Income
₹2,900
Principal ₹5,00,000 returned at maturity
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.
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.
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.
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.
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.
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.