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. Perfect for building an emergency fund or saving for specific goals like buying a car or funding a vacation.
Key Features of Recurring Deposits
- Minimum Tenure: 6 months (varies by bank)
- Maximum Tenure: Up to 10 years
- Minimum Monthly Deposit: ₹100-₹500 (varies by bank)
- Compounding: Quarterly (most banks)
- Premature Withdrawal: Allowed with penalty (0.5-1%)
- Loan Facility: Available up to 90% of RD balance
- Auto-Debit: Monthly amount deducted automatically from savings account
Benefits of Recurring Deposits
- Disciplined Savings: Forces you to save a fixed amount every month without fail.
- Guaranteed Returns: Interest rates are locked at the time of opening, unaffected by market volatility.
- Flexible Tenure: Choose tenure from 6 months to 10 years based on your goals.
- Liquidity: Can be closed prematurely in emergencies (with minimal penalty).
- Loan Against RD: Avail a loan up to 90% of your RD balance at lower interest rates.
- Senior Citizen Benefit: Additional 0.25-0.5% interest for investors above 60 years.
- Automated Investment: Set and forget with auto-debit from savings account.
RD vs FD vs SIP Comparison
| Feature | RD | FD | SIP |
|---|---|---|---|
| Returns | 6.7% – 7.5% | 6.5% – 7.5% | 12% – 15% |
| Investment Mode | Monthly | Lump Sum | Monthly |
| Risk Level | Zero Risk | Zero Risk | Market Risk |
| Ideal For | Short-term goals (1-5 years) | Lump sum parking | Long-term wealth (10+ years) |
| Liquidity | Medium (with penalty) | High (with penalty) | High (can redeem anytime) |
| Tax on Returns | As per tax slab | As per tax slab | LTCG: 12.5% (gains >₹1.25L) |
Expert Tip: Use RD for short-term goals and emergency funds. For retirement or long-term wealth, combine RD with SIP to balance safety and growth.
RD Interest Taxation (2026 Rules)
Interest earned on Recurring Deposits is fully taxable as per your income tax slab. It is added to your annual income under "Income from Other Sources".
- TDS Deduction: Banks deduct 10% TDS if interest exceeds ₹40,000 in a year (₹50,000 for Senior Citizens).
- Form 15G/15H: Submit these forms to avoid TDS if your total income is below the taxable limit.
- Higher TDS: 20% TDS if PAN is not provided to the bank.
- ITR Filing: You must declare RD interest in your Income Tax Return even if TDS is not deducted.
How to Use this RD Calculator
- Enter your monthly deposit amount (minimum ₹500).
- Input the interest rate offered by your bank (check latest rates).
- Select tenure in years and additional months.
- Enable senior citizen mode if you're 60+ years for bonus rates.
- Click "Compare Bank Rates" to see current rates from popular banks and Post Office.
- Review maturity amount, total investment, and interest earned.
- Save your calculation or share via WhatsApp for future reference.