Recurring Deposit (RD) Calculator
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A Recurring Deposit (RD) enables individuals to build savings by depositing a fixed amount each month for a specified duration, earning guaranteed interest comparable to fixed deposits. It provides the automated discipline of a monthly SIP while eliminating market volatility risk.
In India, banks and the Post Office compound recurring deposit interest on a quarterly basis using Indian Banks' Association (IBA) guidelines. The FinToolkit RD Calculator computes your exact maturity proceeds, total deposit amount, and cumulative interest earned.
How recurring deposit interest is calculated
Because each monthly deposit remains in the bank for a different number of months, interest is calculated by compounding each instalment individually based on its remaining tenure until maturity:
Where:
• P = Monthly instalment amount
• r = Annual interest rate (as decimal)
• t = Number of months that specific instalment stays invested until maturity
Worked calculation example
Consider depositing ₹5,000 per month for a tenure of 3 years (36 months) at an interest rate of 7.00% per annum with quarterly compounding.
| RD Parameter | Amount / Calculation |
|---|---|
| Monthly deposit | ₹5,000 / month |
| Deposit tenure | 3 years (36 monthly instalments) |
| Total principal deposited | ₹1,80,000 (₹5,000 × 36) |
| Interest rate | 7.00% p.a. (Quarterly Compounded) |
| Cumulative interest earned | ₹20,815 |
| Maturity proceeds | ₹2,00,815 |
Over 3 years, the regular monthly commitment of ₹5,000 accumulates ₹1,80,000 of your own money, generating an additional ₹20,815 in interest to deliver ₹2,00,815 at maturity.
Tax treatment of RD interest
- Fully taxable: Recurring deposit interest is taxed under "Income from Other Sources" at your regular income tax slab rate.
- TDS applicability: Banks deduct 10% TDS under Section 194A if total interest from all term and recurring deposits across the bank exceeds ₹40,000 in a financial year (₹50,000 for senior citizens).
- Post Office RDs: Five-year Post Office Recurring Deposit accounts offer sovereign security and quarterly compounding interest backed by the Central Government.
Frequently asked questions
What happens if I miss an RD monthly instalment?
Most commercial banks charge a nominal penalty (typically ₹1.50 to ₹2.00 per ₹100 of instalment per month) for delayed payments. If multiple consecutive instalments are missed, the bank may close the account prematurely.
Can I withdraw money from an RD before maturity?
Yes. Banks permit premature closure of recurring deposits, but apply a penalty (typically 0.50% to 1.00% below the applicable interest rate for the period the deposit remained active). Partial withdrawals are generally not permitted on bank RDs.
Is an RD better than a mutual fund SIP?
For short-term goals of 1 to 3 years where capital preservation is paramount (such as vacation savings or emergency buffers), an RD provides guaranteed, risk-free returns. For long-term goals exceeding 5 to 7 years, equity mutual fund SIPs historically offer superior inflation-adjusted returns.
Related savings calculators
- Fixed Deposit (FD) Calculator — compare lump-sum fixed deposit returns against monthly recurring deposits.
- SIP Calculator — evaluate long-term mutual fund compounding for horizons over 5 years.
- Emergency Fund Calculator — determine how many months of expenses to maintain in liquid deposits.
- PPF Calculator — explore tax-free long-term government savings.
Trust, accuracy and transparency
Educational purpose
FinToolkit is an educational tool. Nothing here is investment, tax, insurance or legal advice, and no result should be treated as an offer or a quote.
Financial accuracy
Every result is produced by a published formula running at full double precision in your browser. Only the displayed figures are rounded.
Formula verification
Each formula is checked against the standard method used by Indian lenders, fund houses, insurers or the relevant statute, and re-verified whenever rules change.
Data sources
Rules and rates are taken from official sources such as the Income Tax Department, RBI, SEBI, EPFO, PFRDA and India Post.
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