RD Calculator

What is a Recurring Deposit (RD)?

A Recurring Deposit (RD) is a systematic savings instrument offered by banks and post offices in India. It allows you to deposit a fixed amount every month for a predetermined tenure, earning interest that is compounded quarterly as per Indian banking standards. RDs are particularly popular among individuals who want to build a savings corpus through small, regular contributions without taking any market risk. Think of it as a disciplined savings plan with guaranteed returns — a bank-offered alternative to mutual fund SIPs, but with the safety of fixed returns.

How RD Maturity is Calculated

RD interest in India is calculated using quarterly compounding. Each monthly deposit earns interest for the remaining period of the RD, and the interest is compounded every quarter. The maturity value is computed as the sum of the compounded value of each individual monthly instalment:

Maturity = P × [(1 + r/n)^nt − 1] / [1 − (1 + r/n)^−1/3]

• P = Monthly deposit amount
• r = Annual interest rate (in decimal)
• n = Compounding frequency per year (4 for quarterly)
• t = Tenure in years

For example, if you deposit ₹5,000 per month at 7% p.a. for 5 years, your total deposit would be ₹3,00,000 and the maturity amount would be approximately ₹3,59,965, earning you about ₹59,965 in interest.

Worked Example 2: Building a Wedding Fund

Suppose you want to save for your daughter’s wedding in 7 years. You start an RD with ₹10,000 per month at 7.25% p.a. (HDFC Bank rate). Over 7 years (84 months), your total deposits amount to ₹8,40,000. With quarterly compounding, the maturity value works out to approximately ₹11,08,430, giving you interest earnings of about ₹2,68,430. That’s a 32% return on your total deposits — entirely risk-free and guaranteed. If you had kept the same amount in a savings account at 3.5% p.a., you would have earned significantly less. This example shows how even a modest rate advantage in an RD compounds into a meaningful difference over a longer tenure.

Current RD Interest Rates in India (2025–26)

Note: Rates are indicative and subject to change. Post Office RD is only available for a fixed 5-year tenure. Small finance banks generally offer the highest rates but with lower deposit insurance awareness. All bank deposits up to ₹5,00,000 are insured under DICGC.

RD vs FD vs SIP vs PPF: Detailed Comparison

Tax on RD Interest (FY 2025–26)

Interest earned on RDs is fully taxable as “Income from Other Sources” and added to your total income. TDS at 10% is deducted if the total interest earned across all FDs and RDs in a bank exceeds ₹40,000 per year (₹50,000 for senior citizens). Unlike PPF or ELSS, RD does not offer any tax deduction under Section 80C. If your total income is below the taxable limit, submit Form 15G (or 15H for seniors) to avoid TDS deduction. Under the new tax regime for FY 2025–26, all interest income is taxable without any deductions, making the effective post-tax return on RDs lower for investors in higher tax brackets.

Common Myths About Recurring Deposits

• “RD and FD give the same returns”: Not quite. An FD earns interest on the full principal from day one, while in an RD, each monthly instalment earns interest only for the remaining tenure. For the same rate and tenure, an FD on the total amount will always yield more interest than an RD. However, the comparison is unfair because RD is for monthly savers who do not have the lump sum upfront.
• “RD interest is compounded monthly”: In India, all banks compound RD interest quarterly, not monthly. This is as per RBI guidelines. Some online calculators use monthly compounding, which gives slightly inflated results.
• “Post Office RD is always better than bank RD”: Post Office RD currently offers 6.70% for a fixed 5-year tenure, which is competitive but not the highest. Several small finance banks offer 7.5–8.5% for similar tenures. However, Post Office RDs are backed by the Government of India, offering sovereign safety.
• “RD is tax-free like PPF”: This is a common misconception. RD interest is fully taxable at your slab rate. PPF enjoys EEE (Exempt-Exempt-Exempt) status, meaning contributions, interest, and maturity are all tax-free.
• “You can’t get a loan against an RD”: Most banks allow you to take a loan against your RD, typically up to 80–90% of the deposit value. The interest rate on such loans is usually 1–2% above the RD rate, making it a cost-effective borrowing option.

Post Office RD vs Bank RD

The India Post Office offers a popular 5-year RD scheme that is backed by the Government of India. Key differences from bank RDs include: Post Office RD has a fixed 5-year tenure (no flexibility), the current rate is 6.70% p.a. compounded quarterly, the minimum monthly deposit is just ₹100, and there is no maximum limit. Bank RDs offer more tenure flexibility (6 months to 10 years), potentially higher rates at small finance banks, and the convenience of net banking and auto-debit from your savings account. Post Office RDs can be opened at any post office branch, making them accessible even in rural areas where bank branches may be limited.

Tips for Recurring Deposit Investors

• Set up auto-debit: Link your RD to your savings account for automatic monthly deductions to avoid missed payments and penalty charges.
• Compare bank rates regularly: Small finance banks and some co-operative banks offer significantly higher RD rates than large banks. Check rates before opening a new RD.
• Ladder your RDs: Instead of one large RD, open multiple RDs with staggered maturity dates. This improves liquidity and lets you reinvest at potentially higher rates.
• Consider flexi-RD: Some banks like SBI offer flexi-RD where you can vary the monthly deposit amount. This is useful if your income fluctuates.
• Use RD for short-term goals: For goals beyond 5 years, consider SIP in balanced or equity funds for potentially higher returns that outpace inflation.
• Avoid premature withdrawal: Banks typically charge a penalty of 0.5%–1% on the applicable rate for early closure. Plan your tenure carefully.
• Submit Form 15G/15H: If your total income is below the taxable limit, submit these forms at the beginning of the financial year to avoid unnecessary TDS deduction on interest.

When to Use This RD Calculator

Use this RD calculator to estimate the maturity value of your monthly deposits, plan for specific short-term savings goals like a vacation or wedding fund, compare RD returns across different banks and tenures, and understand how quarterly compounding grows your savings. Whether you are comparing bank RD rates, evaluating a Post Office RD, or deciding between an RD and an FD, this tool gives you accurate maturity projections to make informed decisions.