RD Calculator

Each instalment earns for a different length of time

A recurring deposit is not one deposit earning interest for the full term. The first instalment earns for the entire period, the second for one month less, and the final instalment earns for a single month. This is why the maturity value is well below what a lump sum of the same total would produce, and why simple interest calculations on the total contributed always overstate the result.

Compounding convention

Indian banks conventionally compound RD interest quarterly, not monthly, even though instalments are monthly. Some post office schemes use their own convention. The difference is modest but real, and it is why a bank's own maturity figure may differ slightly from a generic calculator.

Missing an instalment

Banks charge a penalty for missed instalments, typically a small amount per hundred per month, and repeated defaults can lead to the account being closed prematurely with interest recalculated at the savings rate. If cash flow is uncertain, a smaller monthly commitment that you can definitely maintain is better than a larger one you might miss.

Tax treatment

RD interest is fully taxable as income from other sources at your slab rate. There is no exemption comparable to PPF. Banks deduct TDS at 10 percent once interest across your deposits with that bank exceeds the annual threshold, and at a higher rate if PAN is not provided. TDS is not the final liability: if your slab rate is higher you owe the difference, and if you are below the taxable limit you can file Form 15G or 15H to prevent deduction.

Where an RD makes sense

It suits a known expense on a known date, a fee instalment or an insurance premium, where capital certainty matters more than return. For long-horizon goals the return generally trails inflation after tax, so it is a savings instrument rather than a wealth-building one. Compare against a liquid fund or an equity SIP for anything beyond three years.