RD Calculator

About Recurring Deposit (RD)

Recurring Deposit is a systematic savings plan where you deposit a fixed amount every month for a fixed period. Ideal for salaried individuals building a savings habit.

Key Features

• Interest Rates: 6% - 8% p.a. (similar to FD rates)
• Tenure: 6 months to 10 years (most banks)
• Min Deposit: ₹100/month (varies: ₹100 - ₹1,000)
• Max Deposit: No limit (some banks have upper limit)
• Compounding: Quarterly (like FD)
• Senior Citizen Bonus: +0.5% extra (most banks)
• Premature Closure: Allowed (penalty: 1% on rate)

How RD Works

• Open RD account with fixed monthly deposit amount
• Deposit same amount every month on same date
• Interest calculated quarterly on accumulated deposits
• Missed deposit: Penalty (₹1-₹5 per ₹100 per month)
• At maturity: Principal + interest credited

RD Formula

M = P × [(1+r)^n - 1] / [1 - (1+r)^(-1/3)]

• M = Maturity Amount
• P = Monthly Deposit × 3 (per quarter)
• r = Quarterly Interest Rate
• n = Number of Quarters

RD vs Other Savings Options

• RD vs FD: RD monthly deposits vs FD lumpsum; RD builds discipline
• RD vs SIP: RD guaranteed 7% vs SIP risky 10-12%; SIP for long-term
• RD vs Savings: RD 7% locked vs Savings 3-4% liquid
• RD vs PPF: PPF 7.1% tax-free, 15-year vs RD 7% taxable, flexible tenure

Penalty for Missed Deposits

• Late payment charge: ₹1 - ₹5 per ₹100 per month delayed
• Example: ₹5,000 deposit missed 2 months → Penalty ₹100-₹500
• Repeated defaults: Account can be closed by bank
• Grace period: Usually 2-3 months before closure

Premature Closure

• Allowed after minimum period (usually 3-6 months)
• Penalty: 1% reduction in interest rate
• Interest calculated: At reduced rate for actual months held
• Some banks: Penalty waived for senior citizens/emergencies

Tax on RD Interest

• Interest Taxable: As "Income from Other Sources"
• TDS: 10% if interest > ₹40,000/year (>₹50,000 for seniors)
• Form 15G/15H: Submit to avoid TDS if no tax liability
• No 80C Benefit: RD investment NOT eligible for deduction

Example Calculation

When to Choose RD?

• Salaried individuals saving monthly from income
• Building emergency fund systematically
• Saving for specific goal (vacation, gadget, down payment)
• Want guaranteed returns without market risk
• Lack discipline for manual monthly savings

RD Benefits

• ✅ Builds savings discipline (forced monthly commitment)
• ✅ Safe investment (bank-backed, no risk)
• ✅ Higher returns than savings account (7% vs 3-4%)
• ✅ Flexible tenure (6 months to 10 years)
• ✅ Senior citizen bonus (+0.5%)
• ✅ Loan facility (against RD, 80-90% of balance)

RD Limitations

• ❌ Lower returns than mutual funds/stocks (7% vs 10-12%)
• ❌ No tax benefit (unlike PPF, ELSS)
• ❌ Interest fully taxable (no exemption)
• ❌ Penalty on missed deposits
• ❌ Premature withdrawal penalty

Pro Tips

• Set up auto-debit from salary account (never miss)
• Choose tenure matching your goal timeline
• Compare rates across banks (small finance banks offer higher)
• Senior citizens: Always mention age for bonus rate
• Link to same bank savings for easy deposits
• Start small (₹1K/month) and increase later

Common Mistakes to Avoid

• ❌ Starting with unaffordable amount (risk of defaults)
• ❌ Not setting up auto-debit (forgetting deposits)
• ❌ Breaking RD prematurely (loses 1% interest)
• ❌ Not comparing bank rates (missing 0.5-1% extra)
• ❌ Ignoring senior citizen benefit