Cumulative Vs. Non-Cumulative FD


The fixed deposit has long been one of India’s safest and most popular investment options, providing guaranteed returns in the form of interest. A fixed deposit can be classified into two types – a cumulative fixed deposit and a non-cumulative fixed deposit. A cumulative fixed deposit is an investment that allows the investor to receive interest as a sum of money at maturity. A non-cumulative fixed deposit, on the other hand, pays the investor interest regularly.

Overview of Cumulative Fixed Deposit

The term “cumulative fixed deposit” refers to FD types with a fixed interest rate that serves the beneficiary through the payment of interest accrued on the invested amount at the maturity date. Investors earn interest on both the principal and the interest from previous periods. At the end of the tenure, the investor receives the final maturity amount after adding compounded interest to the principal.

When it comes to cumulative fixed deposits, they are ideal for those who do not rely on income generated by interest. They can be calculated in advance using an FD calculator. Individuals looking for long-term investments or those with idly held savings can consider a cumulative fixed deposit. 

Overview of Non-Cumulative Fixed Deposit

Non-Cumulative Fixed Deposits can pay out interest on an annual, half-yearly, quarterly, or monthly basis. Investors get a regular pay-out of their accrued interest based on their preferred pay-out time frame. As a result, there has been a decline in the amount paid out at maturity. Fixed deposits are paid out regularly due to their predetermined return rate. The maturity period of the plan ranges from six months to ten years, depending on the plan.

These fixed deposits may be the right choice for investors looking for a low but consistent supply of regular income, such as retirees. If you are in the position of needing a regular income, you should consider a non-cumulative fixed deposit, especially if you are retired or on your retirement age. Before investing, you should calculate FD interest amounts in advance using the FD calculator tool. Thus, this is a good investment if you wish to receive regular income from your savings.

Here are a few points to consider when choosing between cumulative and non-cumulative fixed deposits.

Pay-out of interest

If you open a cumulative fixed deposit account, the interest and the principal will be paid together at maturity. However, in a non-cumulative FD, you can choose to receive interest monthly, quarterly, half-yearly, or annually.

Implications for Taxation

FDs with cumulative interest is automatically taxed when the interest exceeds the tax law’s limit. If you are not eligible to be charged TDS, you must submit a duly filed Form 15G/15H. Furthermore, if you aim to reduce your tax outgoing, you might be interested in some tax-saving cumulative FDs. It is taxable to the extent that the interest earned on a non-cumulative FD is subject to their income tax slab.

Treatment of Interest

One of the most important differences between cumulative FDs and non-cumulative FDs is how interest is treated. A cumulative FD compounded interest is earned on interest. Thus, the interest earned when a cumulative FD matures is greater than that earned on a non-cumulative FD. In addition, in non-cumulative FDs, there is no option of reinvesting the interest since the interest is paid regularly. With the help of the FD calculator, you can calculate the maturity and interest amounts accordingly.


The cumulative option ensures a higher rate of return than a non-cumulative fixed deposit due to the compound interest it earns. You can verify it by using the FD calculator online tool. In addition, the maturity period for cumulative fixed deposits ranges from 6 months to 5 years, which makes them an ideal long-term investment option for individuals who want to receive a guarantee. 

A cumulative fixed deposit, however, may not be the preferred option for every investor. It is also commonly known as a money multiplier when referring to a cumulative fixed deposit. Nevertheless, cumulative fixed deposits are great for individuals with steady incomes or salaried workers. It is also possible to select a non-cumulative fixed deposit if you are interested in earning a regular income from your investments.