How they pay out the interest for the F.D

• If you close your FD before maturity; you get the interest applicable for the period the FD was in force. Usually the interest rates for FD < 1 yr is ~ 6% and for >= ` yr it is 8.5-9 % 
• If FD is held till maturity, one gets full compounded interest on the principal. If one breaks FD before maturity, then the interest earned will be lessened by 1% (varies from bank to bank).Say if one books an FD with 9% interest for 3 yrs. At the end of three yrs, he will get compounded interest @ 9% per annum on his principal. Say if he breaks the FD after 2 yr 11 months, then he will get compounded interest @ 9 – 1 = 8% per annum for the tenure of 2 yrs 11 months. The penalty % to be deducted varies from bank to bank, but may not cross 1% for most of the banks.Once an FD is created, one can't withdraw the interest or principal before maturity without breaking the FD. So if FD is booked for 5 yrs, then principal and compounded interest will be available only after 5 yrs – unless you want to break the FD in between.