501-Day FD at 8.3%: ₹5 Lakh Interest Calculation

 

501-Day FD Offers Over 8% Interest: How Much Will ₹5 Lakh Earn?

A 501-day fixed deposit (FD) is attracting attention as some small finance banks offer interest rates above 8% for senior citizens. One such example is Unity Small Finance Bank, which currently offers 7.80% per annum to general investors and 8.30% to senior citizens on its 501-day FD for retail deposits below ₹3 crore. The rates were revised from June 11, 2026 and are reflected in the bank’s latest rate disclosure.

For someone considering a ₹5 lakh deposit, the headline rate looks attractive. But the actual interest earned, taxation, premature-withdrawal rules and deposit-insurance limit are equally important before putting money into the FD.

What Is Special About the 501-Day FD?

The 501-day tenure sits between one year and 18 months, making it a relatively short-to-medium-term investment.

According to Unity Small Finance Bank's latest published retail FD rate card, deposits below ₹3 crore earn:

Customer category	501-day FD rate
General investors	7.80% p.a.
Senior citizens	8.30% p.a.

The same rate card shows 7.50% for a 12-month FD for general customers and 8% for senior citizens, making the 501-day option particularly relevant for depositors seeking a higher rate over a slightly longer period.

The bank also states that FD rates can change without prior notice, although the rate applicable to an FD is generally determined when the deposit is booked, subject to the product's terms and conditions.

₹5 Lakh FD for 501 Days: How Much Interest?

Let's take an investment of ₹5,00,000 for 501 days.

At the advertised annual rates, a simple pro-rata calculation gives an approximate interest amount of:

• General investor at 7.80%: about ₹53,532

• Senior citizen at 8.30%: about ₹56,963

That means the approximate amount before considering the exact payout structure and taxes would be around:

• General investor: ₹5.54 lakh

• Senior citizen: ₹5.57 lakh

These figures are an illustration based on the annualised rate and 501-day period. The actual maturity amount can differ depending on whether the depositor chooses cumulative or non-cumulative interest and the bank's precise interest-calculation methodology.

For a cumulative FD, interest is retained and paid at maturity rather than being periodically withdrawn. That can produce a somewhat different maturity figure because of compounding.

Why Are Small Finance Banks Offering Higher FD Rates?

Small finance banks have historically used competitive deposit rates to attract retail deposits and expand their funding base.

This is important because banks need deposits to support lending and other banking activities. Offering a higher FD rate can make a bank more attractive to savers who might otherwise keep their money with larger private or public-sector banks.

Major banks often offer lower FD rates than the highest-paying small finance banks. Recent comparisons have shown that small finance banks frequently occupy the higher end of the FD-rate spectrum.

However, a higher interest rate should not be treated as a free extra return. Depositors should consider the bank's financial position, terms, liquidity and deposit-insurance protection rather than comparing interest rates alone.

The ₹5 Lakh Deposit-Insurance Point Investors Should Know

This is perhaps the most important point for someone planning to put exactly ₹5 lakh into an FD.

The Deposit Insurance and Credit Guarantee Corporation (DICGC) currently insures eligible bank deposits up to ₹5 lakh per depositor per bank, including both principal and interest, when held in the same right and capacity. Deposits across different branches of the same bank are aggregated for this purpose.

That means putting ₹5 lakh of principal into an FD does not mean the entire maturity amount, including future interest, is covered by the ₹5 lakh insurance ceiling.

For example, if the ₹5 lakh principal grows beyond ₹5 lakh with interest, the amount above the insurance limit would not fall within DICGC's ₹5 lakh maximum coverage.

This does not mean the FD is unsafe; it simply means investors should understand the insurance limit when deciding how much money to keep with one bank.

What About Premature Withdrawal?

An FD is designed for a fixed period, but investors may sometimes need the money earlier.

Unity Small Finance Bank's published terms state that premature withdrawal attracts a 1% penalty applied to the rate applicable for the period the deposit has remained with the bank.

Therefore, investors should avoid locking their emergency fund into a 501-day FD merely because the interest rate looks attractive.

A better approach can be to keep an emergency reserve separately and use an FD only for money that is unlikely to be required during the investment period.

Interest Income Is Taxable

FD interest is not tax-free simply because the investment is guaranteed by a bank.

Interest earned on fixed deposits is taxable according to the applicable income-tax rules. Depending on the investor's circumstances, the bank may also deduct TDS when the relevant threshold and conditions are met.

Therefore, the 8.30% headline rate for senior citizens is not the same as an 8.30% post-tax return.

For investors in higher tax brackets, the effective return after tax can be significantly lower.

This is particularly important when comparing an FD with other investments. The correct comparison is between post-tax FD returns and the post-tax risk-adjusted return of alternatives, rather than comparing headline rates alone.

Who Should Consider a 501-Day FD?

A 501-day FD may make sense for investors who:

• Want relatively predictable returns

• Do not want direct exposure to stock-market volatility

• Have a specific financial goal roughly 1–1.5 years away

• Prefer fixed-income products

• Can keep the money invested until maturity

It may be less suitable for someone who needs high liquidity or is investing money required for emergencies.

Senior citizens may find the product particularly interesting because the current 501-day rate is 8.30%, 50 basis points above the general rate.

What Investors Should Check Before Booking

Before opening any high-interest FD, investors should check more than the advertised percentage.

Look at the latest interest-rate card, whether the FD is cumulative or non-cumulative, premature-withdrawal penalty, taxation, nomination facility and the bank's DICGC insurance status.

It is also worth checking whether the ₹5 lakh DICGC ceiling is sufficient for your overall deposits with the same bank. The DICGC states that deposits held in the same capacity at the same bank are aggregated when calculating insurance coverage.

Bottom Line

The 501-day FD is an interesting option for conservative investors seeking a return above what many large banks offer. At Unity Small Finance Bank, the current rate is 7.80% for general investors and 8.30% for senior citizens, for retail deposits below ₹3 crore.

On a ₹5 lakh investment, the advertised rate translates into roughly ₹53,500–₹57,000 of interest over 501 days on a simple pro-rata basis, before tax and subject to the exact FD payout structure.

The key takeaway is that investors should not focus only on the 8% headline. Tax, premature withdrawal, the exact maturity calculation and the ₹5 lakh DICGC insurance ceiling all matter when deciding whether a high-interest FD is appropriate.

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This article is for informational and educational purposes only and should not be considered investment advice