How is RD interest calculated in India?

RD interest is compounded quarterly. Since deposits are made monthly, the formula sums up compound interest for each installment individually based on the number of months it remains with the bank.

Can I withdraw my RD before the tenure ends?

Yes, premature withdrawal of RD is allowed, but banks usually charge a penalty (typically 0.5% to 1% lower than the applicable rate for the period the deposit remained with the bank).

Is RD interest taxable?

Yes, interest earned on a Recurring Deposit is fully taxable under the head "Income from Other Sources" at your applicable income tax slab rates.

What is TDS on RD interest?

Banks deduct Tax Deducted at Source (TDS) at 10% if the annual interest exceeds ₹40,000 (₹50,000 for senior citizens). If your total income is below the taxable limit, you can submit Form 15G or Form 15H to prevent TDS.

Which bank offers the highest RD interest rate?

Interest rates vary by bank, tenure, and customer type. Generally, small finance banks offer higher rates (7.5% - 8.5%) compared to major public and private sector banks (6.5% - 7.2%).

What happens if I miss an RD instalment?

Most banks charge a small late payment penalty (typically ₹1.50 per ₹100 per month) for missed instalments. Some banks allow a grace period, while others may reduce the overall maturity value.

How does RD compare with SIP?

RD offers guaranteed interest and return of principal, making it risk-free. A mutual fund SIP (Systematic Investment Plan) is market-linked and offers higher return potential but carries investment risk.

What is the difference between RD and FD?

An RD is built through small monthly investments, while a Fixed Deposit (FD) requires a one-time lump-sum investment at the start of the tenure.

RD Calculator – Recurring Deposit Interest & Bank Rates

RD Calculator

Calculate your Recurring Deposit (RD) maturity amount and interest. Compare HDFC, SBI, ICICI, and Axis RD interest rates with TDS and premature withdraw rules.

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How to Use RD Calculator

Enter your Monthly Deposit amount or select a target savings amount (Reverse Solver Mode).
Choose your investment tenure (in Months or Years) and select a major Indian bank to pull live interest rates.
Select whether you are a General Citizen or Senior Citizen (seniors typically receive an extra 0.50% return).
Review your estimated maturity amount, total principal invested, accumulated interest, and maturity date.
Check the Bank comparison dashboard to see where you can earn the highest rate.
Download your customized A4 PDF planning report or export data sheets to CSV.

What is a Recurring Deposit (RD)?

A Recurring Deposit (RD) is an investment tool that helps individuals with a regular source of income to build a savings pool. Instead of investing a lump sum like in an FD, you invest a fixed monthly amount for a pre-determined period. RDs are ideal for individuals who want to build a secure financial cushion without committing large lump sums upfront.

RD Compounding Formula & Methodology

The maturity amount of a Recurring Deposit is calculated using the formula prescribed by the Indian Banks Association (IBA): **M = P × [ (1 + i)ⁿ - 1 ] / [ 1 - (1 + i)^(-1/3) ]** Where: - **M**: Maturity Value - **P**: Monthly Installment Amount - **i**: Interest rate per quarter (r / 400) - **n**: Number of quarters (Number of months / 3)

RD vs Fixed Deposit (FD)

RD is suited for disciplined savers who can commit a portion of their monthly salary. FD is designed for investors who already have a lump sum (e.g. bonus, inheritance) and want to lock it in at a guaranteed rate. While both offer similar security, the compounding yield of an FD is slightly higher because the entire principal compounds from day one.

RD vs Mutual Fund SIP

An RD is a debt-based savings vehicle offering 100% principal safety. A SIP (Systematic Investment Plan) invests in equity or debt mutual funds. While equity SIPs have historically beaten inflation with 12%-15% returns over long periods, they carry market volatility and do not offer guaranteed maturity values.

RD Taxation & TDS Rules

Interest earned on RDs is added to your annual gross income and taxed as per your tax slab. Under Section 194A, banks deduct 10% TDS (20% if PAN is not provided) if the accumulated annual interest exceeds ₹40,000 for general taxpayers or ₹50,000 for senior citizens.

Frequently Asked Questions

What is a Recurring Deposit (RD)?: A Recurring Deposit is a special type of term deposit which allows people to make regular monthly investments and earn interest rates comparable to Fixed Deposits.
How is RD interest calculated in India?: RD interest is compounded quarterly. Since deposits are made monthly, the formula sums up compound interest for each installment individually based on the number of months it remains with the bank.
Can I withdraw my RD before the tenure ends?: Yes, premature withdrawal of RD is allowed, but banks usually charge a penalty (typically 0.5% to 1% lower than the applicable rate for the period the deposit remained with the bank).
Is RD interest taxable?: Yes, interest earned on a Recurring Deposit is fully taxable under the head "Income from Other Sources" at your applicable income tax slab rates.
What is TDS on RD interest?: Banks deduct Tax Deducted at Source (TDS) at 10% if the annual interest exceeds ₹40,000 (₹50,000 for senior citizens). If your total income is below the taxable limit, you can submit Form 15G or Form 15H to prevent TDS.
Which bank offers the highest RD interest rate?: Interest rates vary by bank, tenure, and customer type. Generally, small finance banks offer higher rates (7.5% - 8.5%) compared to major public and private sector banks (6.5% - 7.2%).
What happens if I miss an RD instalment?: Most banks charge a small late payment penalty (typically ₹1.50 per ₹100 per month) for missed instalments. Some banks allow a grace period, while others may reduce the overall maturity value.
How does RD compare with SIP?: RD offers guaranteed interest and return of principal, making it risk-free. A mutual fund SIP (Systematic Investment Plan) is market-linked and offers higher return potential but carries investment risk.
What is the difference between RD and FD?: An RD is built through small monthly investments, while a Fixed Deposit (FD) requires a one-time lump-sum investment at the start of the tenure.