Leap years are those that occur every four years and have 366 days as compared to 365. February has 29 days instead of 28 in that year. In this case, will you earn more interest? Here is a quick compilation of how banks calculate interest rates on Fixed Deposits in a leap year.

In all cases of Domestic FD Accounts where the terminal quarter is incomplete, you need to calculate the interest for the complete quarter and the actual number of days, reckoning 365 or 366 days, based on the calculation of interest in order of completed quarters and days.

Points to note

If your deposit tenure is for two quarters or more, the interest is calculated quarterly and compounded for complete quarters. Where the terminal quarter is incomplete, the interest is calculated proportionately for the number of days reckoning the year, 365 or 366 days. The maturity amount which is mentioned in the receipt is calculated without TDS.

When calculating the half-yearly interest, the interest calculated for the previous six months minus TDS is added to the principal amount to calculate the interest for the current half-year. For short-term deposits of less than two quarters but more than one quarter, simple interest will be paid for the complete quarter and interest for the remaining days, reckoning the year 365 to 366 days, without the compounding effect. 

For short-term deposits of less than one quarter, the interest is calculated proportionately for an actual number of days, reckoning 365 to 366.

Illustration

For instance, if you invest an FD principal amount of Rs. 1 lakh at an interest rate of 4.5% over a tenure of 180 days over 365 days in a year, the interest income you will receive will be 100000*180*4.5%/365 = Rs. 2219.17. Similarly, if you try investing in an FD for 366 days with the principal amount of Rs. 1 lakh at the same interest rate for 180 days, including the leap month, the interest paid will be Rs. 100000*180*4.5%/366 = Rs. 2213.11.

Simple account opening process

Opening an FD is a hassle-free process. Customers can seamlessly initiate their FD through user-friendly online platforms or by visiting the nearest branch. While comparing banks to find the best scheme, it is recommended you use the FD interest calculator to understand how much interest income you can earn from your deposit.

You need to log in online, select the FD you want to open, enter the Savings Account details for seamless debits, enter the FD details, enter the nominee details, and submit them to the bank. You need not submit too many documents as the entire process is digital.

Conclusion

As we navigate the intricate terrain of financial planning, FD options emerge as a strategic pathway to financial stability. They cater to diverse individuals ' unique aspirations and requirements with competitive interest rates, flexible tenures, and specialised schemes.