RD Calculator

What is a Recurring Deposit (RD)?

A Recurring Deposit (RD) is a special kind of term deposit offered by banks which helps people with regular incomes to deposit a fixed amount every month into their RD account and earn interest at the rate applicable to Fixed Deposits. It is similar to making a Fixed Deposit (FD) of a certain amount in monthly installments.

How is RD Interest Calculated?

The interest on Recurring Deposits is usually compounded quarterly in most Indian banks. The formula used for calculation is based on compound interest:

A = P * n + Interest (Compounded Quarterly)

Where P is the monthly installment and n is the number of months. Since each installment stays in the bank for a different duration (the first installment for the full tenure, the last one for just one month), interest is calculated on each installment individually and then summed up.

Benefits of RD Account

Recurring Deposits are a popular investment choice for several reasons:

• Safe Investment: RD is considered a low-risk investment option as it is not market-linked like mutual funds.
• Regular Savings: It encourages a disciplined habit of saving a fixed portion of your income every month.
• Fixed Returns: The interest rate is locked in at the beginning of the tenure, offering guaranteed returns regardless of interest rate fluctuations.
• Flexible Tenure: You can choose a tenure ranging from 6 months to 10 years, depending on your financial goals.

RD vs SIP: Which is Better?

While both RD and SIP involve regular monthly investments, they cater to different types of investors. RD offers safety and guaranteed returns (usually 5-7%), making it suitable for conservative investors. SIP (Systematic Investment Plan) in mutual funds invests in the stock market and can offer higher returns (12-15%) but comes with market risk. If your goal is long-term wealth creation and you can tolerate some risk, SIP might be better. If you want zero risk, RD is the way to go.

Taxation on RD

Interest earned on RD is fully taxable. It is added to your total income and taxed according to your income tax slab. Additionally, banks deduct TDS (Tax Deducted at Source) at 10% if the interest income exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year.

Disclaimer: This RD Calculator provides estimates based on general compound interest formulas (usually quarterly compounding). Actual maturity amounts may differ slightly due to bank-specific calculation methods, leap years, or TDS deductions. Please check with your bank for exact figures.