Fixed Deposit in Nepal: What You Actually Get After TDS
7 min read · Published 31 Aug 2026 (15 Bhadra 2083)
Updated 29 Sept 2026 (13 Aswin 2083)
A bank advertises 9% on a one-year fixed deposit. You put in Rs. 1,00,000. How much comes back?
Almost everyone answers Rs. 1,09,000. It is neither that, nor close enough to ignore, two separate things move the number, and they move it in opposite directions.
Two things the poster does not mention
Compounding. Nepali banks usually compound FD interest quarterly, not annually. So the interest earned in the first three months starts earning interest itself. This pushes your return slightly above the advertised rate.
Tax. Interest from a bank deposit is taxed at source. For an individual this is 6% TDS, deducted by the bank before the money reaches you. This pulls the return down, and it is larger than the compounding gain.
The arithmetic on Rs. 1,00,000 at 9%
After one year
The advertised 9% became 9.31% through compounding, then 8.75% after tax. Not a disaster, but if you were comparing it against something quoting a flat 9%, you were not comparing like with like.
After five years
Worth noticing: simple interest at 9% for five years would be Rs. 45,000. Compounding added Rs. 11,058 before tax. Over long periods the quarterly compounding matters more than the tax does.
Rates and TDS change. Confirm both with your bank before committing, this is arithmetic, not advice.
Where FDs actually make sense
An FD does one thing extremely well: it makes a known amount available on a known date, with no chance of being worth less.
Good fits:
- Money you will need on a date: school admission next Baisakh, a wedding, a down payment
- The second half of an emergency fund: keep one month liquid, park the rest where it earns
- Money you would otherwise spend: the lock is a feature, not a bug
Bad fits:
- Your only emergency fund. Breaking it early costs you.
- Money you are trying to grow substantially. After tax and inflation, an FD roughly preserves value. It does not build wealth.
Breaking it early
Most Nepali banks pay a reduced rate if you withdraw before maturity, often the savings rate, sometimes the FD rate for the period completed minus a penalty. Either way you lose a meaningful part of the interest.
Two ways to avoid the choice:
Ladder it. Instead of one Rs. 3,00,000 deposit for three years, make three Rs. 1,00,000 deposits maturing one year apart. Something matures every year, so you rarely have to break anything.
Keep the first month liquid. An emergency fund that is entirely locked is not an emergency fund.
Does it beat inflation?
This is the question that matters and the one nobody puts on the poster.
If your FD nets 8.75% and inflation runs around 5–6%, your money is growing in real terms by roughly 3%. Positive, but modest. An FD protects purchasing power; it does not multiply it.
Which is exactly what it is for. The mistake is expecting a savings instrument to behave like an investment. Gold, FDs and shares each do a different job, and the trouble starts when one is used for another's purpose.
Work out your own number
The maturity figure depends on your amount, the rate, the term and how often the bank compounds, which is why the counter figure and a generic online calculator rarely agree.
Aafno Hisab includes an FD calculator that compounds quarterly and nets off the 6% TDS, so it shows what actually reaches your account rather than a headline. You can also record the deposit as an investment and get a reminder before it matures, so it does not quietly roll over at whatever rate the bank feels like.
The short version
- Nepali banks compound FD interest quarterly, which lifts the effective rate slightly
- 6% TDS is deducted at source, which lowers it more
- Rs. 1,00,000 at 9% for a year returns about Rs. 1,08,750: an effective 8.75%
- Over five years, compounding adds around Rs. 11,000 more than simple interest
- Ladder your deposits so you never have to break one
- An FD protects value against inflation; it does not grow wealth
Related: How much should you save every month? · Gold vs FD vs shares
