RD Calculator

Total Interest
Principal amount

Total investment

Total returns

Total Value

A recurring deposit (RD) calculator is an online tool that helps you quickly determine your RD maturity amount and the total interest earned on it. The online calculator uses the amount to be invested monthly, the term of the recurring deposit, and the interest rate offered on the RD to calculate the maturity amount.

How is RD Interest Calculated?

To make an investment decision, it is essential to get an estimate the potential returns from it. Thus, the RD interest calculator will help an investor estimate the potential returns.

Interest in RD is compounded quarterly. Until then, it is calculated as simple interest. For example, when an investor starts their RD in the month of February, the amount will earn only simple interest until the month of March. Only after the first quarter, the interest starts compounding. To calculate the maturity value of an RD, you can use the following formula:

RD Maturity Amount = R[(1+i) (n-1)]/1-(1+i)(-1/3))

  • R = Monthly Instalment. This is the amount that you invest in the RD account every month. The minimum deposit amount varies for every bank and can be as low as Rs 10.
  • N = number of quarters (tenure). It is the duration for which you hold the money in the RD account. Generally, RD tenure varies between 6 months to 10 years.
  • i = Rate of interest/400. The amount of interest earned depends on the deposit amount in the RD account, the applicable interest rate by the bank, and the tenure of RD.

Let’s take the example of Arun, who is planning to invest INR 5,000 every month at 8% interest p.a. for 24 months or eight quarters. When we insert these values in the formula, we get,

M=5,000[(1+8/400) (8-1)]/1-(1+8/400)(-1/3))

M=INR 1,26,369

The maturity value for Arun on his investment in RD is INR 1,26,369.

The calculation might look simple but is not. Hence one can use an RD interest calculator to save time and get accurate results.

Differences Between Recurring Deposits and Fixed Deposits

Comparing RDs with Fixed Deposits (FDs) is fair as they both are considered risk free investment options available for investors. The following are the key differences between recurring deposit and fixed deposit:

  1. The primary difference between RD and FD is the style of investment. In an RD, investors make regular monthly instalments for the entire investment tenure. In an FD, a fixed amount is invested at the start of the tenure.
  2. An FD can earn more money than an RD, and the difference will only increase with the increase in the tenure. This is because, in an FD, you invest a lumpsum amount for the entire term and hence earn more interest. In an RD, the deposit is made monthly. And thus earn less interest.
  3. Investors who want to save small portions of their income regularly can invest in Recurrent Deposits. Investors with a lumpsum amount can invest in Fixed Deposits.

How can an RD calculator help you?

A recurring deposit, as the name suggests, is a continuing investment. The returns on these deposits can be challenging to track for investors. The interest is compounded quarterly, and there are several variables involved, which makes the calculations multipart.

An RD deposit calculator eliminates the hassle of computing its returns manually and enables an investor to know the exact amount their deposits will accrue after the relevant period. 

The only consideration that the investor has to do manually is the TDS deduction. As per new RBI norms, RDs are also liable for TDS deduction; however, there is no uniformity in its implementation across financial institutions, which is why RD calculators don’t take it into account.

Apart from that small caveat, an RD amount calculator offers an investor with the following advantages:

  • The calculator enables investors to plan their future finances with greater clarity by providing them with the exact amount their investment will accrue.
  • It’s convenient to use and saves a lot of time for the investors, which they can otherwise use productively.
  • The accuracy of these calculators can never be in question. Accurate estimates are pivotal for prudent financial planning. 

Benefits of using RD calculator

Using an RD maturity calculator offers several advantages for depositors. Here are some benefits you can enjoy.

1. Time-saving: The calculator performs calculations within seconds, saving you valuable time. The entire process, from inputting the variables to obtaining the result, is quick and efficient.

2. Clear financial planning: Investors can plan their future finances more effectively by knowing the exact maturity amount of their investment.

3. Accuracy: By inputting the variables correctly, you can rely on the calculator to provide accurate results. There is no room for errors or confusion, ensuring precise calculations every time.

4. Free to use: RD calculators are typically available for free and can be used as many times as you need.

5. User-friendly: RD calculators are designed to be easy to use, even for individuals without extensive financial knowledge. The interface is intuitive, allowing you to navigate and obtain results effortlessly.

6. Planning flexibility: With the calculator, you can experiment with different values for variables such as deposit amounts, tenures, and interest rates. This flexibility enables you to explore various investment scenarios and plan your finances accordingly.

7. Informed decision-making: The calculator provides you with quick comparisons of maturity amounts based on different input parameters. This helps you make informed decisions about your investment strategy and choose the most suitable options.

What are the tax benefits on RD?

Just like other personal tax-saving and investment options, Recurring Deposit (RD) schemes are subject to taxes. If the total interest earned from an RD exceeds Rs. 10,000 in a single financial year, a TDS (Tax Deducted at Source) of 10% is deducted.

Factors to consider before opening an RD account

Here are some things to remember before opening an RD account.

  1. Tenure: RD schemes offer different tenures, such as short-term, medium-term, and long-term options. Choose a tenure that aligns with your financial goals.
  2. Interest rate: RD interest rates vary across banks and tenures. Longer tenures generally offer higher rates, but exceptions exist.
  3. Minimum amount: Check the minimum investment amount required by the bank. Ensure you have sufficient funds in your savings account for monthly deductions.
  4. Withdrawals: RD amounts cannot be withdrawn before maturity. Partial withdrawals may not be allowed or there may be a penalty.
  5. Taxability of interest: The interest earned on RDs is taxable. Banks deduct TDS if the interest exceeds a certain threshold. Submit form 15G/15H if your income is below the tax limit to save tax.

Frequently Asked Questions

What is a Recurring Deposit (RD)?

A Recurring Deposit is a type of fixed deposit offered by banks and financial institutions, where individuals can deposit a fixed amount regularly (usually monthly) for a predetermined period at a fixed interest rate.

How does a Recurring Deposit work?

When opening an RD account, you agree to deposit a fixed amount at regular intervals for a specific duration. The interest rate is predetermined, and at the end of the tenure, you receive the principal amount along with the accumulated interest.

What is the minimum deposit amount for opening an RD account?

The minimum deposit amount required for opening an RD account varies across banks and financial institutions. It can range from as low as a few hundred units of the local currency to a few thousand.

What is the tenure or duration of a Recurring Deposit?

The tenure or duration of an RD typically ranges from 6 months to 10 years, depending on the bank or institution. You can choose a tenure that suits your financial goals and requirements.

Can I withdraw money from my RD account before the maturity date?

Generally, partial or premature withdrawals from RD accounts are not allowed. However, some banks may provide the option of premature closure with certain conditions, which may vary from bank to bank.

What happens if I miss a monthly deposit in my RD account?

If you miss a monthly deposit in your RD account, most banks impose a penalty or charge. The penalty amount and rules for missed payments depend on the bank’s policies.

What is the interest rate offered on Recurring Deposits?

The interest rates offered on RDs vary from bank to bank and depend on the prevailing market conditions. Banks may also offer different interest rates based on the tenure of the RD.

Are the interest rates on RD fixed or subject to change?

The interest rates on RDs can be either fixed or subject to change. Some banks offer fixed rates for the entire tenure, while others may revise the rates periodically based on market conditions.

Is the interest earned on Recurring Deposits taxable?

Yes, the interest earned on Recurring Deposits is generally taxable as per the income tax regulations of your country. The interest is added to your taxable income and taxed at the applicable income tax rate.

What happens to my RD account after maturity?

After the maturity of your RD account, the principal amount along with the interest earned is credited to your savings or linked bank account. You can choose to renew the RD or utilize the funds as per your financial needs.