Fixed Deposit Calculators III: How many days are there in a year?

Last Updated on

How many days are there in a year?  According to Google it is 365.242 days. If I hold one year fixed deposits and determine maturity values using 365.242 days as the tenure, will my calculation match the maturity values listed in the bank statement? Unlikely.

Perhaps I should round it off and use 365 days? If my calculation still does not match the value the bank says it will offer, what should I do? Perhaps assume there are 360 days in a year? After all if I assume there are 30 days in a month then 12 X 30 = 360.

These are the kind of questions which were asked by reader Ravindra who was trying to tally the maturity value given by my fixed deposit calculators (which assume 365 days per year) with his bank statements.

There are many minor variations of the compounding formula. Different banks use different versions. So do many online calculators.

Why bother? After all the bank will only offer what it calculates. No doubt about that.  However if you need to find out the tax  (advance tax if applicable) to be paid each year, then the exact maturity value should tally with our calculation.

To me, there seems to be only one way to tally the results. When the bank statement does not match with a calculator, use the maturity value in the bank statement and determine the effective number of days in a year used in the calculation.

If it is 365, then great. My calculators will work fine. If it is less than 365 then you can use the result to get the maturity value given by the bank and find out the tax you need to pay each financial year along with the advance tax liability if applicable.

How it works:

1. Use the first calculator to:

  • determine maturity value, using starting and ending dates of the FD.
  • You can also calculate total pre-tax and post-tax corpus for 365 days and 360 days per year.
  • to determine the effective number of days used by the bank in calculating FD maturity value. This is especially useful if the maturity value does not match with the bank statement

Download the fixed deposit maturity value and effective number of days in a year calculator

2. If the effective number of days is different from 360 or 365, enter it in the second calculator to determine:

  • post-tax corpus. Pre-tax corpus will now tally with the bank statement.
  • Tax to be paid each financial year
  • advance tax liability if any

Download the fixed deposit tax liability calculator (using effective number of days in a year)

According to Ravindra, SBI uses 365 days per year. So my fixed deposit calculators will work just fine.

HDFC uses 363.927 per year. I can live with it although I don’t understand the choice.  This could be due to a difference in the way daily/monthly interest is calculated.

For example, if I say annual interest is 12%, then effective monthly interest is not 12%/12 = 1% but  (1+12%)^(1/12)-1 = 0.949%. A small difference – nothing to lose sleep over. Many people avoid this complication and simply use 12%/12. For more details see: Mutual Fund SIP Returns Calculator

According to Ravindra, using my effective no of days in a year calculator, he gets 353.055 per year for a fixed deposit offered by IDBI bank. I don’t understand this logic. Can you?

Do use the calculators and check with your bank statements and let me know if the bank records tally with the standard 365 days per year calculation or not. If you have friends or family working in banks please forward them this article and see if they can make sense out of this.

Related articles

 

Do share if you found this useful

Create a "from start to finish" financial plan with this unique open-source robo advisory software template


 Don't like ads but want to support the site? Subscribe to the ad-free newsletter! 
You will get the full post-ad-free delivered to your inbox for Rs. 3000 a year. Follow this link to read the terms and sign up! 


About the Author M Pattabiraman author of freefincal.comM. Pattabiraman is the co-author of two books: You can be rich too with goal based investing and Gamechanger. “Pattu” as he is popularly known, publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis, including a robo advisory template for use by beginners. Contact information: freefincal {at} Gmail {dot} com He conducts free money management sessions for corporates (see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints.

Content Policy

Freefincal has original unbiased, conflict-of-interest-free,  topical reports, reviews, commentary and analysis on all aspects of personal finance like mutual funds, stocks, insurance etc. All guest authors and contributors to the site also do not have any conflict of interest. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. No promotional content We do not accept sponsored posts and link exchange requests from content writers and agencies. This is our privacy policy Our website is non-profit in nature. The revenue from the advertisement will only be used for hosting charges, domain registration charges, specific plugins necessary for traffic growth and analytics services for search engine optimisation.
Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media


Do check out my books


You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingMy first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.  It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantGamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantMy second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step.  Get the pdf for ₹199 (instant download)

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

4 Comments

  1. The information found on this e-mail that you have provided is very valuable and I thank you for it.
    Regards,
    Charles Okpara ccim

  2. The information found on this e-mail that you have provided is very valuable and I thank you for it.
    Regards,
    Charles Okpara ccim

Leave a Reply

Your email address will not be published. Required fields are marked *