A cumulative fixed deposit keeps interest inside the deposit under its terms until maturity. A non cumulative deposit pays interest during the term at the agreed intervals. The distinction describes payment timing, so the account balance and the cash received need separate records.
Neither label identifies a deposit as the right choice for a particular person. This article compares the bookkeeping using fictional amounts and an assumed rate, with no bank recommendation.
Follow a cumulative deposit
Assume a fictional deposit of ₹1,00,000 runs for exactly one year at 6% nominal annual interest compounded quarterly. Each quarter's interest remains in the deposit.
After the first quarter, 1.5% of ₹1,00,000 adds ₹1,500, making the balance ₹1,01,500. The next quarter's calculation uses that larger balance. By the end of four quarters, the amount is approximately ₹1,06,136.36 before deductions.
The interest has increased the deposit's balance. It has not appeared as four separate cash receipts in the linked bank account. A record showing only that bank account will miss the interest building inside the deposit until a payment occurs.
The maturity amount contains both the original ₹1,00,000 and the accumulated interest. Treating the entire ₹1,06,136.36 as income would count the returned principal as new earnings.
Follow a deposit that pays interest out
Use a different fictional contract for the same ₹1,00,000 and one-year term. It pays 6% simple annual interest in four equal quarterly payments. Each payment is ₹1,500, for total interest of ₹6,000.
The principal remains ₹1,00,000 throughout the term under these assumptions. At maturity, the principal is returned. Across the whole year, receipts total ₹1,06,000, but only ₹1,00,000 arrives in the final principal payment.
This illustration assumes equal full quarters and a specific payout calculation. It does not say every bank calculates periodic payments by dividing a quoted annual rate into equal pieces. Actual contracts can apply their own payment and rounding methods.
SBI's terms distinguish reinvestment deposits from deposits with periodic interest payments. Axis Bank's published methodology also addresses payment timing. The deposit confirmation identifies the rules that apply to the booked account.
A maturity comparison needs earlier payments
Comparing only the final credit gives an incomplete picture. The cumulative example ends with ₹1,06,136.36. The payout example ends with a principal credit of ₹1,00,000 because ₹6,000 was paid earlier.
Subtracting those two final credits would suggest a difference of ₹6,136.36. Comparing all receipts under the fictional assumptions gives a difference of ₹136.36 instead. The larger apparent gap came from leaving out cash already received.
Reinvesting a periodic payout somewhere else creates another transaction with another return and date. It cannot be silently added to the original deposit's assumed compounding. A fair calculation needs to specify what happened to each payment.
Separate balances from earned interest
A deposit record can contain principal, start and end dates, agreed rate, payout option and quoted maturity amount. A separate cashflow record can show the dates and amounts actually credited. An interest statement can report earned interest and deductions that differ from cash timing.
Those records answer different questions. A cashflow report describes money received in a period. A balance record describes money still held at a date. Tax reporting can follow its own recognition rules, which this article does not calculate.
FinTarget's Fixed Deposits documentation describes its maturity estimate and manual override. The module does not generate a bank's periodic payment schedule or import its interest credits. Its default annual-compounding estimate also differs from the quarterly cumulative example above. A bank-confirmed maturity amount and dated payment records preserve the distinction between the deposit and the cash it has paid.