Kotak Mahindra Bank has three types of fixed deposit schemes laid down for users to invest in. But before locking one’s money in any of the schemes, checking the returns using the Kotak Mahindra FD Calculator is a must. This is an online tool which is available on Paisabazaar.com and can be used free for any number of times. The FD calculator requires the deposit amount, tenure and applicable Kotak Mahindra FD rates to calculate the maturity amount. Read further to understand how to use this FD calculator.
How to Use Kotak Mahindra FD Calculator?
Follow the steps mentioned below to seamlessly use the Kotak Mahindra Bank fixed deposit calculator:
- Open the FD calculator at Paisabazaar.com.
- In the tool displayed on top of the page, enter the FD amount.
- Enter the period of deposit in years or months (use the drop down box to select months or years)
- Check the Kotak Mahindra Bank FD rates using the table below and fill the applicable rate of interest in the concerned field.
- Now click on “Calculate” to see the maturity amount as well as the interest amount, separately.
Please note that the calculator currently computes compound interest on monthly basis.
Simple Interest vs. Compound Interest
|Simple Interest||Compound Interest|
|Interest earned on principal amount for the fixed term (the entire tenure) at the prevailing FD rates.||Compound interest is simply the interest earned on principal amount plus the interest accrued previously. So, it is interest on interest.|
|Simple interest is earned on the same principal through the tenure.||Principal amount changes in every cycle as the previous accrued interest is added to the current fund value which is called as compounding.|
|Returns are less as compared to when compounded.||Returns are higher as the interest is reinvested with the fund value in every cycle.|
|Simple Interest formula = P*R*T/100||To compute amount after compounding;|
A = P (1+r/n) ^ (n * t)
Let us understand the difference using the following example:
A customer invests Rs. 1 lakh for 3 years at 5% interest rate per annum then at the time of maturity, he/she will earn the following returns:
- Returns earned at simple interest
SI = Principal amount x Rate of Interest x Tenure / 100
= 1, 00, 000 x 5 x 3/ 100
= Rs. 15,000
Total maturity amount = Rs. 1, 15, 000
- Returns earned at compound interest (annual compounding)
Amount = Principal (1+Rate of Interest/No. of compounding in a year or n) ^ (n * no. of years or t)
A = P (1+r/n) ^ (n * t)
A = 1, 00, 000 (1 + 0.05/4) ^ (4*3)
A = 1, 00, 000 (1.1607) ^ (12)
A = 1, 16, 075
Thus, there is a difference of Rs. 1,075.
Interest Payout vs. Reinvestment
When talking of payment of interest, the bank provides two options. First is interest payout. In this case, the accrued interest is paid to the investor regularly at the frequency chosen. It can be monthly, quarterly, semi-annually or annually. Usually people chose to receive interest as and when it accrues.
In the other option, i.e. reinvestment of interest, interest is not immediately paid but held and reinvested with the original deposit amount. This reinvestment is done after deducting tax at source (TDS). This leads to higher returns because the principal on which interest is calculated is subsequently enhanced every time the interest gets accrued.
Investors must note that the FD rates remain the same for both types of interest payment options. The reason why the interest earned in the first option falls less in comparison to the reinvestment option is purely mathematical, i.e. big principal amounting to higher returns earned.