What is a Recurring Deposit (RD)?
A Recurring Deposit (RD) is a term deposit offered by banks and Post Offices that allows individuals to deposit a fixed amount every month for a pre-defined tenure. It is ideal for salaried people who want to save a portion of their income regularly.
Unlike a Fixed Deposit (FD) where a lump sum is required, RD brings the discipline of regular savings with interest rates similar to FDs.
RD Interest Taxation (TDS Rules)
Interest earned on Recurring Deposits is fully taxable. It is added to your annual income and taxed according to your slab.
- TDS: Banks deduct 10% TDS if interest exceeds ₹40,000/year (₹50,000 for Seniors).
- Form 15G/15H: You can submit these forms to avoid TDS if your total income is below the taxable limit.
RD vs SIP: Which is better?
Investors often confuse RD vs SIP. While RD offers guaranteed returns (6.5%–7.5%), SIPs in Mutual Funds offer market-linked returns (12%–15%) but come with higher risk. RD is safer, but SIP beats inflation better in the long run.
How This Calculator Helps Your Planning
Since RDs involve multiple cash flows (one deposit every month), calculating the final maturity manually is difficult.
Plan Short-Term Goals
Calculate exactly how much to save monthly to buy a car or fund a vacation in 2 years.
Verify Bank Quotes
Ensure your bank is calculating interest correctly using the quarterly compounding formula.
Compare Returns
See the difference in earnings between a 5-year RD and a 3-year RD instantly.
RD Interest Calculation Formula
The interest on RD is compounded quarterly in most Indian banks. The formula sums up the compound interest earned on each individual monthly installment.
- M: Maturity Value
- P: Monthly Installment Amount
- r: Annual Interest Rate (%)
- tᵢ: Time in months for the i-th installment
Key Advantages of RD
- Disciplined Savings: Forces you to save a fixed amount every month.
- Guaranteed Returns: Interest rates are locked at the time of opening.
- Liquidity: Can be closed prematurely in emergencies (with penalty).
- Loan Facility: Avail a loan up to 90% of your RD balance.