RD Calculator
Calculate recurring deposit maturity value and interest earned
Investment Details
Deposit vs Interest
What Is a Recurring Deposit (RD)?
A Recurring Deposit (RD) is a unique term-deposit product offered by banks and post offices in India. It allows you to invest a fixed amount every month for a pre-decided tenure and earn interest at rates similar to Fixed Deposits (FDs).
Unlike an FD where you need a large lump sum upfront, an RD is designed for salaried individuals or those with regular income who want to build a savings corpus systematically. It instills financial discipline by forcing you to save a portion of your income every month before you spend it.
How is RD Interest Calculated? (The Formula)
Many investors assume RD interest is calculated simply on the total amount. However, it is more complex because each monthly installment is with the bank for a different duration.
Key Concept: Quarterly Compounding
Most Indian banks compound interest on RDs quarterly. This means the interest you earn in the first
quarter is added to your principal, and in the next quarter, you earn interest on that increased amount.
The RD Maturity Formula
M = P * [(1 + R/400)^(N) - 1] / [1 - (1 + R/400)^(-1/3)]
(Note: This is a complex derivation used by core banking systems. For simplicity, think of it as a series of FDs: The 1st installment is invested for X months, the 2nd for X-1 months, and so on.)
RD vs. FD vs. SIP: The Ultimate Comparison
Choosing between a Recurring Deposit, Fixed Deposit, and Mutual Fund SIP depends on your risk appetite and liquidity.
| Feature | Recurring Deposit (RD) | Fixed Deposit (FD) | Mutual Fund SIP |
|---|---|---|---|
| Investment Style | Small fixed monthly amounts | One-time lump sum | Small fixed monthly amounts |
| Returns | Guaranteed (via Returns) | Guaranteed (Fixed) | Variable (Market Linked) |
| Risk | Zero (Low) | Zero (Low) | Moderate to High |
| Penalty on Missed Payment | Yes (Bank charges penalty) | N/A (One time deposit) | No (Investment just skips) |
Taxation Rules for RD (TDS Explained)
RDs are safe, but they are not tax-free.
- TDS (Tax Deducted at Source): Banks deduct 10% TDS if the interest earned on your FD/RD exceeds ₹40,000 in a financial year (₹50,000 for Senior Citizens). If you do not provide PAN, TDS is 20%.
- Income Tax Slab: Even if TDS is deducted, you are liable to pay tax according to your income bracket. If you fall in the 30% slab, you must pay the remaining 20% tax when filing your ITR.
- Form 15G/15H: If your total income is below the taxable limit, you can submit Form 15G (or 15H for seniors) to the bank to prevent TDS deduction.
Premature Withdrawal & Penalties
Life is unpredictable. If you need to break your RD before the tenure ends:
Most banks charge a 1% penalty on the applicable interest rate. This means you will get interest at the rate applicable for the period the deposit remained with the bank, minus 1%.
Instead of breaking the RD, consider taking a loan / overdraft against it. Banks typically offer loans up to 90% of the deposit value at 1-2% higher interest than your RD rate. This saves your deposit from being closed.
Frequently Asked Questions
Can I change the monthly installment amount later?
No. In a standard RD, the installment amount is fixed at the start. If you want flexibility to deposit varying amounts, look for "Flexi RD" products offered by some banks (like SBI iWish).
What happens if I miss a monthly payment?
Banks typically charge a penalty (e.g., ₹1.50 per ₹100 per month). If you miss multiple payments (usually 6), the bank may close the account prematurely and refund the money.
Is RD interest higher than Savings Account?
Yes, significantly. Savings accounts offer 3-4% p.a., while RDs offer 6-7.5% p.a., making them a much better option for parking short-term savings.
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Last Updated: January 2026 | Reviewed for accuracy