Term Deposit Interest Calculator: The Formula, No Widget Needed

August 24, 2026 3 Min Read

A term deposit interest calculator should show you the actual math, not just a number. Here’s the formula behind it, both for simple interest and compounding, plus what tax takes off the top.

Quick Answer: Term Deposit Interest Calculator

For interest paid at maturity, the formula is simple. Interest equals your deposit, times the rate, times the number of months divided by 12. For interest that compounds monthly, the formula grows a little more complex, since each period earns interest on the previous period’s balance too. After tax, your real return is lower again. Multiply your gross interest by one minus your marginal tax rate to see what you actually keep.

The Simple Interest Formula

This applies when interest is paid once, at maturity. Most short-term deposits, three months or less, work this way.
The formula is deposit times rate times time. Interest equals principal multiplied by the annual rate, multiplied by the term in months, divided by 12.
A worked example makes it concrete. $10,000 at 5% per annum for 6 months. That’s $10,000 times 0.05 times 0.5, which comes to $250 in interest.
This is the easiest deposit type to check by hand. No compounding to account for, since there’s only ever one interest payment.

The Compound Interest Formula

This applies when interest is paid and reinvested regularly. Monthly or quarterly compounding means each payment earns further interest.
The formula grows the balance in stages. Each period, multiply your current balance by one plus the rate for that period, then repeat for every remaining period.
A monthly example shows the effect. $10,000 at 5% per annum, compounded monthly, grows to roughly $10,511 after 12 months. That’s about $11 more than simple annual interest would give.
Compounding matters more over longer terms. The gap between simple and compound interest grows the longer your money sits and the more often it compounds.

The Payment Frequency Trade-Off

Banks often pay a slightly lower rate for regular payouts. Choosing monthly or quarterly interest instead of a lump sum at maturity can mean a lower headline rate.
Regular payouts lose the compounding benefit. Once interest is paid out to you, it stops earning further interest inside that deposit.
A lump sum at maturity usually earns the most overall. If you don’t need the income along the way, letting interest compound to the end typically nets you more.
Check the actual rate difference before choosing. Some banks price this in more heavily than others, so compare the frequency options directly.

What Tax Takes Off Your Return

Term deposit interest counts as taxable income. It’s added to your other income and taxed at your marginal rate.
For 2026-27, the second tax bracket is 15%. That’s down from 16% before 1 July 2026, so older tax-year examples may understate what you keep.
The after-tax formula is straightforward. Multiply your gross interest by one minus your marginal rate, as a decimal, to get your after-tax return.
No TFN means a much higher withholding rate. Without a Tax File Number on record, banks generally withhold 47% of your interest, well above most marginal rates.

FAQ: Term Deposit Interest Calculator

How do I manually calculate term deposit interest?
For interest paid at maturity, multiply your deposit by the annual rate, then by the term in months divided by 12. For compounding deposits, apply the rate to the growing balance each period.

Does term deposit interest compound?
Only if it’s paid and reinvested regularly, such as monthly or quarterly. Interest paid once at maturity doesn’t compound, since there’s only one payment.

How much tax do I pay on term deposit interest?
It’s taxed at your marginal rate, the same as other income. For 2026-27, the relevant bracket for many savers is 15%, down from 16% before 1 July 2026.

Does choosing monthly interest payments reduce my total return?
Often, yes. Regular payouts can carry a slightly lower rate, and once interest is paid out it stops compounding, so a lump sum at maturity usually earns more overall.

What happens if I don’t provide a Tax File Number?
Banks generally withhold interest at 47%, well above most people’s marginal tax rate, so it’s worth providing your TFN before opening a term deposit.