A simple interest FD earns interest only on the principal amount for the entire tenure, while a compound interest FD earns interest on the principal plus any previously accumulated interest, resulting in a higher maturity amount for the same rate and tenure.

More frequent compounding (monthly or quarterly instead of yearly) results in a marginally higher maturity value because interest is calculated and added to the principal more often, letting subsequent interest calculations work on a slightly larger base.

Yes, FD interest is fully taxable as per your income tax slab. Banks deduct TDS if the annual interest exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year, though you can claim a refund at the time of filing your return if you fall in a lower bracket.

Most banks allow premature withdrawal of an FD, but typically charge a penalty of 0.5% to 1% on the applicable interest rate. Tax-saving FDs with a 5-year lock-in are an exception and generally cannot be withdrawn early.

Interest rates vary by bank and tenure, and rates for medium-term deposits (1-3 years) are often the most competitive. It's best to compare current rates across banks and use this calculator with different tenures to see which combination maximizes your maturity amount.