Cumulative vs Non-Cumulative FD
Reinvest interest or take it out? Compare maturity value of cumulative FDs with monthly, quarterly and yearly payout options.
Updated 30 September 2026 · 25 banks trackedAbout the Cumulative vs non-cumulative
In a cumulative FD the interest is compounded quarterly and paid at maturity, so it earns interest on interest. In a non-cumulative FD interest is paid out regularly — good for income, but the total earned is lower because interest is not reinvested.
Cumulative vs Non-Cumulative FD
Comparison
| Cumulative | Non-cumulative | |
|---|---|---|
| Interest paid | At maturity | Monthly / quarterly / half-yearly / yearly |
| Compounding | Quarterly | None (paid out) |
| Total return | Higher | Lower |
| Best for | Wealth building | Regular income |
| TDS | Deducted yearly on accrued interest | Deducted on each credit once above threshold |
Difference on ₹10 lakh
| Tenure | Cumulative interest | Quarterly payout total | Monthly payout total | Extra from cumulative vs monthly |
|---|---|---|---|---|
| 1 year | ₹71,859 | ₹70,000 | ₹69,593 | ₹2,266 |
| 3 years | ₹2,31,439 | ₹2,10,000 | ₹2,08,780 | ₹22,660 |
| 5 years | ₹4,14,778 | ₹3,50,000 | ₹3,47,966 | ₹66,812 |
₹10 lakh at 7% p.a.
How the calculation works
Cumulative: A = P(1 + r/400)^(4t). Quarterly payout total = P × r/400 × 4t. The difference is the compounding benefit.
Frequently asked questions
Is tax different for the two?
No. In both cases interest is taxable every year. For cumulative FDs, declare the interest that accrued each year.
Information is for education and comparison. Rates and rules change — confirm with your bank and a tax adviser before investing. FinancePortal is not a financial or tax adviser.