What Is a Recurring Deposit?
A recurring deposit (RD) lets you save a fixed amount every month with a bank or post office for a chosen period. You earn a fixed interest rate, and at the end you get your deposits back with interest.
An RD suits people who want to build savings from their monthly salary, especially for a goal one to five years away: a holiday, a bike, a gadget or a wedding fund.
How to Use This RD Calculator
- Monthly deposit: the amount you will deposit every month.
- Interest rate: the yearly rate your bank offers.
- Tenure: the number of months you will keep depositing.
The calculator shows your total deposits, the interest earned and your maturity value. The table above shows how your RD grows each year.
RD Calculation Formula
Most banks compound RD interest every quarter. Each monthly instalment earns interest for the time it stays in the account, so the first instalment earns the most.
- M = Maturity value
- R = Monthly deposit
- i = Quarterly rate (yearly rate ÷ 400)
- n = Number of quarters
Example: ₹1,000 a month for 12 months at 7%
- You deposit ₹12,000
- Maturity value = ₹12,462
- Interest earned = ₹462
How Tenure Changes Your RD Value
₹5,000 a month at 7%:
| Tenure | Total deposited | Maturity value | Interest earned |
|---|---|---|---|
| 1 year | ₹60,000 | ₹62,311 | ₹2,311 |
| 3 years | ₹1,80,000 | ₹2,00,686 | ₹20,686 |
| 5 years | ₹3,00,000 | ₹3,59,664 | ₹59,664 |
| 10 years | ₹6,00,000 | ₹8,68,509 | ₹2,68,509 |
Doubling the tenure from 5 to 10 years more than quadruples the interest, because your earlier deposits compound for longer.
RD vs FD: Which Should You Choose?
- Choose an FD when you have a lump sum to invest today.
- Choose an RD when you want to save a fixed amount from your income every month.
For the same total amount and rate, an RD earns less interest than an FD, because each instalment stays invested for less time. That's normal, and it isn't a reason to avoid RDs. They build the saving habit.
RD vs SIP
₹5,000 a month for 5 years:
An RD gives a fixed, guaranteed return. A SIP in equity mutual funds can earn more over long periods but can also fall in value. Use RDs for short goals under three years and SIPs for goals five years or more away.
Tax on RD Interest
RD interest is taxed like FD interest. It is added to your income and taxed at your slab rate. Banks deduct TDS when your total interest from FDs and RDs with them crosses ₹50,000 in a financial year (₹1 lakh for senior citizens). Submit Form 15G or 15H if your income is below the taxable limit.
Tips for RD Savers
Pick a tenure that ends just before you need the money.
Set the instalment date a day or two after your salary arrives.
Banks charge a small penalty for late instalments and may close the RD after several misses.
RD rates vary between banks and the post office. Check before you open.
Save monthly for insurance premiums, school fees or festivals.
Most banks pay senior citizens a higher RD rate too.
Frequently Asked Questions
How is RD interest calculated?
Most banks compound RD interest quarterly. Each monthly instalment earns interest from the month it is deposited until maturity, and the total is your maturity value.
Is RD interest taxable?
Yes. RD interest is taxed at your slab rate. Banks deduct TDS when interest crosses the yearly threshold, which is ₹50,000 for most people and ₹1 lakh for senior citizens.
What happens if I miss an RD instalment?
Banks usually charge a small penalty for a delayed instalment. If you miss several in a row, the bank may close the RD and pay you the balance with interest.
Can I close an RD early?
Yes, most banks allow premature closure, but they usually pay a lower interest rate as a penalty.
Is an RD better than a SIP?
An RD gives a guaranteed return and suits short-term goals. A SIP in equity mutual funds can grow more over the long term but carries market risk.
What is the minimum amount for an RD?
Many banks let you start an RD with as little as ₹100 or ₹500 a month. Check your bank for its minimum.
