Recurring Deposit Calculator

What is a Recurring Deposit (RD)?

A Recurring Deposit (RD) is a special kind of term deposit offered by banks and post offices that helps individuals with regular incomes to save a fixed amount every month and earn a return on it. It's essentially a disciplined savings scheme where you commit to depositing a fixed sum periodically (usually monthly) for a predetermined tenure.

The interest earned on RDs is compounded, typically quarterly, leading to higher returns than a regular savings account. At the end of the tenure, you receive the total deposited amount plus the accumulated interest. RDs are a popular choice for achieving short to medium-term financial goals.

How Does an RD Work? Key Features

• Fixed Monthly Installment: You decide on a fixed amount to deposit each month for the entire tenure.
• Flexible Tenure: RDs can be opened for periods ranging from 6 months to 10 years, depending on the bank.
• Compounding Interest: Interest is generally compounded quarterly, maximizing your earnings over time.
• Guaranteed Returns: The interest rate is fixed at the time of opening the account, providing predictable returns.
• Nomination Facility: You can nominate a beneficiary for your RD account.
• Loan Against RD: Many banks allow you to take a loan against your RD, using it as collateral.

Benefits of Investing in a Recurring Deposit

• Promotes Disciplined Savings: Regular, fixed deposits encourage a habit of consistent saving.
• Higher Returns: RDs offer better interest rates compared to traditional savings accounts.
• Low Risk: Being bank deposits, RDs are considered a very safe investment option.
• Liquidity (Partial): While not fully liquid, the loan against RD facility provides some access to funds.
• Financial Planning: Ideal for planning specific financial goals like a down payment, vacation, or children's education.
• Simple and Accessible: Easy to open and manage, often available through online banking platforms.

Important Considerations for Your RD

• Inflation Risk: While safe, the returns from RDs might sometimes be lower than the inflation rate, reducing purchasing power.
• Penalty for Missed Installments: Banks may levy a small penalty if you miss your monthly deposit.
• Premature Withdrawal: Withdrawing before maturity usually incurs a penalty and results in lower interest being paid.
• Tax Implications: Interest earned on RDs is taxable as per your income tax slab. Banks also deduct TDS (Tax Deducted at Source) if interest exceeds a certain limit.
• Interest Rate Volatility: Once opened, the interest rate remains fixed, which means you won't benefit if market rates rise during your tenure.