RD Calculator — Recurring Deposit
Calculated using the standard quarterly compounding formula used by Indian banks. Small differences may occur due to rounding in bank systems.
What is a Recurring Deposit (RD)?
A Recurring Deposit is a term deposit offered by banks and post offices in India that allows you to invest a fixed amount every month for a predetermined period. At maturity, you receive the total deposits plus interest earned. Unlike a Fixed Deposit that requires a lump sum upfront, RD lets you build savings systematically — making it popular among salaried individuals and those with regular monthly income.
RDs are offered by all commercial banks, post offices (Post Office Recurring Deposit), and some NBFCs. Post Office RDs offer 6.7% per annum (quarterly compounding) as of early 2025, with a 5-year tenure option and sovereign guarantee. Bank RDs typically range from 5.5% to 8.5% depending on the bank and tenure.
Minimum deposit amounts are typically ₹100/month at post offices and ₹500–1,000/month at banks. Maximum tenure is usually 10 years. There is no upper limit on the deposit amount. Senior citizens typically get 0.25–0.50% higher interest than regular customers.
RD Formula Explained
Indian banks use quarterly compounding for RD interest, even though deposits are made monthly. The formula is:
M = R × [(1 + i)^n − 1] ÷ (1 − (1+i)^(-1/3))
Where:
| Variable | Meaning | Example (₹5,000/mo, 7%, 1 yr) |
|---|---|---|
| M | Maturity amount | ₹62,167 |
| R | Monthly installment | ₹5,000 |
| i | Quarterly rate = annual rate ÷ 4 ÷ 100 | 7% ÷ 4 ÷ 100 = 0.0175 |
| n | Number of quarters = months ÷ 3 | 12 ÷ 3 = 4 |
Worked Example — Step by Step
RD vs FD vs SIP — Which Should You Choose?
| Feature | RD | Fixed Deposit (FD) | SIP (Equity Mutual Fund) |
|---|---|---|---|
| Investment pattern | Fixed monthly | Lump sum | Fixed monthly |
| Typical return | 6–8% p.a. | 6.5–8.5% p.a. | 10–14% p.a. (not guaranteed) |
| Risk | Zero | Zero | Market risk |
| Guaranteed returns? | Yes | Yes | No |
| Tax on maturity | Taxable at slab | Taxable at slab | LTCG 12.5% (after 1 yr) |
| Best for | Short-term, capital safety | Lump sum parking | Long-term wealth building |
| Liquidity | Moderate (penalty for early exit) | Moderate (penalty) | High (T+3 days) |
RD is ideal for: building an emergency fund, saving for a specific short-term goal (1–5 years), and for risk-averse investors who cannot tolerate any capital loss. For goals beyond 5 years, SIP in equity mutual funds has historically delivered significantly higher returns, though with market volatility. RD and SIP serve different purposes and are not direct competitors — many financial planners recommend both simultaneously.
Post Office RD — Key Features
The Post Office Recurring Deposit (PORD) is particularly useful for investors in smaller towns with limited banking access. Key features:
| Feature | Details |
|---|---|
| Interest rate | 6.7% p.a. (quarterly compounding) — Q1 FY 2025-26 |
| Tenure | 5 years (extendable by another 5 years) |
| Minimum deposit | ₹100/month |
| Sovereign guarantee | Yes (Government of India backed) |
| Premature closure | After 3 years (with reduced interest) |
| Loan facility | Up to 50% of deposit after 1 year |
Frequently Asked Questions
What is the RD maturity formula?
Banks in India calculate RD maturity using quarterly compounding. The formula is: M = R × [(1 + i)^n - 1] / (1 - (1+i)^(-1/3)), where M is the maturity amount, R is the monthly installment, i is the quarterly interest rate (annual rate ÷ 4 ÷ 100), and n is the number of quarters (tenure in months ÷ 3). For example, ₹5,000/month at 7% for 1 year: i = 0.0175, n = 4, M = ₹62,167.
Is RD interest taxable?
Yes. RD interest is fully taxable as "income from other sources" and taxed at your applicable income tax slab rate. TDS (Tax Deducted at Source) is deducted at 10% if interest exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). If your total income is below the taxable limit, submit Form 15G (or 15H for senior citizens) to avoid TDS. Unlike PPF or EPF, there is no tax exemption on RD interest.
What is the difference between RD and FD?
Fixed Deposit (FD) requires a one-time lump sum investment at the start. Recurring Deposit (RD) accepts a fixed monthly deposit throughout the tenure. FD is ideal for those with a surplus to invest upfront. RD is for systematic savers who want to deposit monthly from regular income — similar in concept to a SIP but in bank deposits. For the same deposit period and interest rate, the FD typically earns more interest because the full amount is invested from day one rather than month by month.
Can I break an RD before maturity?
Yes. Most banks allow premature closure of an RD, but with a penalty. Typically, the bank pays interest at the rate applicable for the actual period the RD was held, minus a 0.5–1% penalty. Some banks impose a minimum lock-in of 3 months before premature withdrawal is allowed. The penalty reduces the effective returns significantly, so RDs should be planned for the full intended tenure.
What happens if I miss an RD installment?
Missing an RD installment attracts a penalty (typically ₹1–₹1.50 per ₹100 per month of delay). Some banks allow a grace period of a few days. If multiple installments are missed consecutively (usually 6+), the bank may foreclose the RD at premature withdrawal rates, reducing your maturity amount. Setting up an auto-debit on your savings account on the due date of the RD prevents missed installments.
Related Calculators
- FD Calculator — Fixed Deposit maturity with quarterly compounding
- SIP Calculator — Systematic Investment Plan returns in mutual funds
- PPF Calculator — Public Provident Fund maturity over 15 years
- Compound Interest Calculator — Compare compounding frequencies