How It Works: Tenures, Profit Payout Options & Auto-Renewal

When opening an FDR, you must make three primary decisions:

• Tenure Selection: Short-term FDRs span 3 to 6 months, whereas medium to long-term FDRs last 1 to 5 years. Typically, 1-year tenures offer the most competitive balance between high yields and cash liquidity.
• Profit Payout Model: You can choose Maturity Payout (collecting all principal + interest at the end of the term), Monthly/Quarterly Profit Payout (ideal for retirees needing regular cash inflows), or Double/Triple Schemes (where interest is compounded until the total sum doubles).
• Maturity Instructions: You must instruct the bank whether to auto-renew the principal only, auto-renew the total value (principal + accrued profit), or encash and auto-transfer the entire amount directly to your linked savings or current account upon maturity.

The FDR Interest Calculation Formulas

Depending on the payout frequency and product terms, banks utilize either simple interest or compound interest models:

1. Simple Interest (For maturity payouts under 1 year):

2. Compound Interest (For long-term FDRs and monthly reinvestments):

Government Tax Rules & Yearly Excise Duties

Earnings from FDR interest are subject to mandatory tax deductions at source (TDS) under the National Board of Revenue (NBR) rules:

• e-TIN Holders (10% Tax): A reduced source tax of 10% is applied to the interest earned if a valid e-TIN certificate is on file.
• Non-TIN Holders (15% Tax): A 15% source tax is applied to the interest earned if no e-TIN is submitted.
• Excise Duty (Year-End): Government applies dynamic annual charges based on the maximum balance in the calendar year (ranging from BDT 150 for BDT 1 Lakh to BDT 50,000 for accounts crossing BDT 5 Crore).

Real-World Worked Example: BDT 500,000 FDR for 1 Year at 10% Interest

Let's calculate the exact earnings step-by-step for a deposit of BDT 500,000 invested in a 1-year bank FDR at a rate of 10% per annum:

1. Total Principal Invested: BDT 500,000.
2. Gross Interest Earned: BDT 500,000 * 10% = BDT 50,000.
3. Tax Comparison:
   • With e-TIN (10% Tax): BDT 50,000 * 10% = BDT 5,000. Net profit = BDT 45,000. Net maturity value = BDT 545,000.
   • Without e-TIN (15% Tax): BDT 50,000 * 15% = BDT 7,500. Net profit = BDT 42,500. Net maturity value = BDT 542,500.
4. Estimated Excise Duty: A standard annual excise duty of BDT 500 is applied on accounts with balances between BDT 1 Lakh and BDT 5 Lakh, slightly adjusting the final cash return.

Step-by-Step Instructions to Use Our FDR Calculator

1. Input your target Deposit Amount (Principal) using the input field.
2. Select the Interest Rate of the chosen bank.
3. Specify the Tenure Duration (input years or months).
4. Select your Tax Status (e-TIN Holder or Non-TIN Holder) to instantly deduct the correct 10% or 15% TDS.
5. Review the comprehensive result dashboard showing your invested principal, accumulated gross interest, government tax deduction, and your final cash return at maturity.

Benefits & Limitations of FDRs

Key Benefits:

• Guaranteed Returns: Volatile stock markets do not impact your FDR. The agreed interest rate remains fixed.
• Liquidity Leverage: Most banks allow you to borrow up to 90% of your FDR balance using an Overdraft (OD) facility.
• Flexible Payouts: You can receive profit payments monthly or quarterly to cover dynamic living costs.

Key Limitations:

• Premature Penalty: Breaking the deposit early voids the agreed high interest rate, and you receive standard savings interest instead.
• Inflation Risk: If high inflation rates outpace the FDR yield, your money's purchasing power declines over time.

Common Mistakes to Avoid

• Blind Auto-Renewal: Letting the bank auto-renew the FDR blindly without checking if other banks are offering significantly higher interest rates at maturity.
• Forgetting e-TIN submission: Failing to submit your e-TIN certificate at the time of account creation, which costs you 5% extra in tax deductions.
• Ignoring Alternative Instruments: Putting all capital in FDRs instead of exploring government-backed options like Sanchayapatra, which often offer higher interest rates.

Eligibility & Document Requirements

FDR accounts can be opened by any resident or non-resident Bangladeshi citizen (joint or individual), minors under parental guardianship, as well as registered businesses, clubs, and charitable organizations.

Documents Required:

• 2 Passport size photographs of the applicant.
• Photocopy of Applicant's NID card or passport.
• 1 Passport size photograph and photocopy of NID of the nominee.
• Photocopy of applicant's e-TIN certificate to qualify for the 10% tax rate.
• For corporate accounts: Board resolution, trade license, and business registration certificates.