What is the RD?
A recurring deposit (RD) is the disciplined cousin of the FD: you commit a fixed amount every month for a fixed tenure, and the bank pays a guaranteed rate with quarterly compounding. It suits anyone who wants FD-style safety but saves from a monthly salary rather than a lump sum.
RDs are perfect for short-term goals with a fixed date — school fees next year, a wedding, a vacation, insurance premium, or building the base of an emergency fund. Miss the "invest before you spend" step and money evaporates; an RD automates it.
Formula & worked example
Each instalment compounds quarterly for the months it stays invested. Equivalent monthly rate: i = (1 + r/4)1/3 − 1, then:
Worked example: ₹10,000/month at 6.8% for 3 years → you deposit ₹3,60,000 and receive about ₹4,00,118 — roughly ₹40,100 of interest, guaranteed. The same saving left in a savings account at 3% would earn only ~₹16,600.
How to use this rd calculator
- Enter the monthly amount you can commit for the full tenure (RDs penalise missed instalments).
- Use your bank’s current RD rate — usually equal to or a touch below the FD rate for the same tenure.
- Set the tenure (6 months to 10 years at most banks) and read the guaranteed maturity value.
Smart tips
- Set the RD debit date 1–2 days after salary credit so it never bounces.
- For horizons beyond 3 years, compare with a SIP — an RD guarantees ~7%, an equity SIP targets 12% with risk.
- RD interest is taxable at slab and TDS rules match FDs — count the post-tax return for high tax brackets.
- Post Office RDs (5-year) are a solid alternative with sovereign backing — currently similar rates to banks.
- If your income is lumpy, a flexible/iWish-style RD lets you vary the deposit without penalties.
Frequently asked questions
How is RD maturity calculated?
Banks compound RD balances quarterly. Each monthly instalment earns interest for the time it remains deposited, which this calculator models with the exact equivalent monthly rate — matching bank tables within a few rupees.
What happens if I miss an RD instalment?
Most banks charge a small penalty (commonly ₹1–2 per ₹100 per month of delay) and persistent default can close the RD early at a reduced rate. Choose an instalment you can sustain in your worst month, not your best.
Can I withdraw an RD before maturity?
Yes — premature closure is allowed with a rate cut similar to FDs (interest for the actual period minus ~1%). Partial withdrawal is generally not allowed; some banks offer a loan against the RD instead.
RD vs SIP — which should I choose?
RD for guaranteed, dated goals within ~3 years. SIP for long-term wealth where you can accept market swings for higher expected returns. Many savers run both: RD for the near goal, SIP for the far one.
Is RD interest taxable?
Yes, fully taxable at your income-tax slab, and TDS applies once total deposit interest at the bank crosses ₹50,000 a year (₹1 lakh for senior citizens).
Want the theory behind the numbers? Read our FD & savings guides on the Money Blog.