You open a DPS, the bank officer types something into a computer, and out comes a number: "Sir, after 5 years you will get ৳3,79,949." Where did that number come from? Magic? A secret bank formula?
Neither. It's simple arithmetic that anyone — yes, us aam janata 🥭 — can follow with a phone calculator. Let's walk through it step by step.
Step 0: What a DPS actually is
A DPS (Deposit Pension Scheme) is a promise between you and the bank:
- You deposit a fixed amount every month (say ৳5,000),
- for a fixed number of years (say 5 years),
- and the bank pays you interest at a fixed rate (say 9% per year).
At the end (maturity), you get back everything you deposited plus the interest it earned. That final amount is the maturity value — the number we're going to build from scratch.
Step 1: The three ingredients
Every DPS calculation needs exactly three numbers:
| Ingredient | Our example |
|---|---|
| Monthly deposit (P) | ৳5,000 |
| Term | 5 years = 60 months |
| Interest rate | 9% per year |
One small conversion first: interest is quoted per year, but you deposit per month. So we convert the yearly rate into a monthly rate:
Monthly rate = 9% ÷ 12 = 0.75% (that is, 0.0075 as a fraction)
That's it for setup. Now the fun part.
Step 2: Watch your money grow, month by month
Here's the key idea: each month, the bank adds 0.75% interest to whatever is sitting in the account, then you add your next deposit on top.
Let's do the first three months by hand (deposits earn interest from the month they're paid — more on that in Step 4):
| Month | You deposit | Balance before interest | + 0.75% interest | Balance after |
|---|---|---|---|---|
| 1 | ৳5,000 | ৳5,000 | ৳37.50 | ৳5,037.50 |
| 2 | ৳5,000 | ৳10,037.50 | ৳75.28 | ৳10,112.78 |
| 3 | ৳5,000 | ৳15,112.78 | ৳113.35 | ৳15,226.13 |
Notice something? In month 2, you earned interest not just on your deposits, but also on last month's ৳37.50 of interest. Interest earning interest — that's called compounding, and it's the engine of the whole scheme.
Early on the interest looks tiny (৳37.50 — barely a plate of fuchka). But it snowballs: in month 60 of our example, a single month's interest is over ৳2,800. That's the same 0.75%, just applied to a much bigger pile.
Step 3: The shortcut formula (what the bank's computer does)
Doing 60 rows by hand is painful, so there's a one-line formula that jumps straight to the answer:
Maturity = P × ((1 + r)^n − 1) ÷ r × (1 + r)
Where P = monthly deposit, r = monthly rate, n = number of months. Plugging in our example (P = 5,000, r = 0.0075, n = 60):
(1.0075)^60= 1.5657 — this is what ৳1 becomes after 60 months of compounding(1.5657 − 1) ÷ 0.0075= 75.4275.42 × 1.0075= 75.99 — think of this as "each ৳1 of monthly deposit becomes ৳75.99 in total"5,000 × 75.99= ৳3,79,949
So:
- Total you deposited: ৳5,000 × 60 = ৳3,00,000
- Interest earned: ৳79,949
- Gross maturity: ৳3,79,949 ✅ — the same number the bank officer told you
If your DPS also has a one-time opening deposit, it simply compounds for the full term on top: initial × (1 + r)^n.
Step 4: Two fine-print details banks differ on
Not every bank runs the math identically. Two settings change the result:
Compound vs simple interest. Most banks compound monthly (the math above). A few instead pay simple interest: each installment earns a flat 0.75% per remaining month, and interest never earns interest. Same ৳5,000 × 60 months at the same 9% would then mature at about ৳3,68,625 — around ৳11,300 less than the compound version. Same advertised rate, smaller snowball.
When the installment starts earning. Most banks credit your installment at the start of its month, so it earns that month's interest (this is what our table assumed). Some only start counting from the next month — each deposit earns one month less, so maturity comes out slightly lower.
This is why two banks advertising "9%" can quote you different maturity values. Always compare the maturity amount, not just the rate. Our DPS calculator lets you switch both settings to match your bank's quote.
Step 5: The deductions nobody mentions at the counter
The maturity value above is gross. Before the money reaches you, two deductions apply (FY2025-26 figures):
1. Source tax on interest. The government taxes the interest portion (not your own deposits):
- 10% if you have a TIN and file returns
- 15% if you don't
In our example: 10% of ৳79,949 = ৳7,995 deducted.
2. Excise duty (আবগারি শুল্ক). A small yearly charge based on your highest balance that year. If the balance stayed within ৳3,00,000 the duty is ৳0; between ৳3–5 lakh it's ৳150/year, and it steps up from there. In our example the balance only crosses ৳3 lakh in the final year, so the total is just ৳150.
Step 6: Put it all together
| Amount | |
|---|---|
| Your 60 deposits | ৳3,00,000 |
| + Interest earned | ৳79,949 |
| = Gross maturity | ৳3,79,949 |
| − Source tax (10%, with TIN) | ৳7,995 |
| − Excise duty | ৳150 |
| = What lands in your hand | ≈ ৳3,71,804 |
That's the whole story. No magic — just monthly compounding, one shortcut formula, and two deductions.
Try it with your own numbers
- DPS Calculator — enter your deposit, term and rate; it shows the full month-by-month breakdown, tax and excise, exactly as computed above
- Compare DPS plans side by side — pit 2–4 bank offers against each other
- Not sure DPS is right for you? Read DPS vs FDR
General guidance only, not financial advice. Interest calculation conventions, tax treatment and rates vary by bank and change with each Finance Act — a government-approved DPS may even be partly exempt from source tax. Confirm the latest terms with your bank before committing.