Maturity Value

Maturity Value is the total amount of money that an investor receives when a fixed-income investment like a fixed deposit, recurring deposit, or bond reaches the end of its tenure.

It includes the original principal invested plus all the interest earned over the investment period. Knowing the maturity value helps you plan for future financial goals and compare different investment options. What is Maturity Value? When you invest ₹1 lakh in a 5-year fixed deposit at 7% per annum compounded quarterly, the maturity value is approximately ₹1.40 lakhs — meaning you earn ₹40,000 in interest over 5 years on the ₹1 lakh principal. The exact maturity value depends on the rate of interest and the compounding frequency. In India, the maturity value of key instruments is calculated differently. For a 5-year Recurring Deposit (RD) of ₹5,000 per month at 6.5% per annum, the maturity value at the end of 5 years is approximately ₹3.49 lakhs, of which ₹3 lakhs is your contribution and ₹49,000 is interest earned. For a 10-year PPF contribution of ₹1.5 lakhs per year at the current PPF rate (7.1% as of 2024), the maturity value of the account after 15 years would be approximately ₹40 lakhs. For tax-saving fixed deposits under Section 80C, the maturity value includes the principal and accrued interest, all of which is taxable as per your income slab. The Tax Saving FD has a 5-year lock-in period, and premature withdrawal is not permitted. The actual post-tax return depends on your marginal tax rate — for a 30% taxpayer, a 7% FD effectively gives only 4.9% after tax. When a deposit or investment matures, the bank or institution typically credits the maturity proceeds to your linked bank account. For FDs, you can choose to reinvest the maturity proceeds into a new FD or withdraw them. For PPF, the account continues to earn interest even after maturity (for up to 5 years of extension), though no fresh contributions are allowed during the extension period. Always check whether the stated maturity value is pre-tax or post-tax. For high-net-worth individuals in the 30% tax bracket, a ₹1 crore FD at 7% generates ₹7 lakhs in annual interest — ₹2.1 lakhs goes to taxes — reducing the effective yield to 4.9%. This is why tax-efficient instruments like ELSS mutual funds (which have a 3-year lock-in but qualify for Section 80C and have equity growth potential), PPF, and NPS often provide better after-tax returns than FDs for those in higher tax brackets.