The formula: quarterly compounding over the tenure
Maturity amount = principal × (1 + rate÷4)^(number of quarters). For ₹1,00,000 over 5 years (20 quarters) at 7.5%: the deposit grows to ₹1,44,994.80 — ₹44,994.80 in total interest.
A shorter tenure, a smaller total
The same ₹1,00,000 over just 1 year (4 quarters) at the lower 1-year rate of 6.9% grows to only ₹1,07,080.60 — ₹7,080.60 in interest. Both the shorter time and the lower applicable rate reduce the total growth compared to the 5-year deposit.
Why compounding happens quarterly, not annually
POTD interest is compounded quarterly even though it's only credited to the account once a year — meaning interest earned in one quarter starts earning its own interest the very next quarter, rather than waiting for the annual credit date. This produces a slightly higher effective return than annual compounding at the same quoted rate would.
The tax angle
Only the 5-year POTD tenure qualifies for a Section 80C tax deduction — the 1, 2, and 3-year options don't, which is worth weighing alongside the maturity amount itself when choosing a tenure.