RD Calculator – Calculate Your Recurring Deposit Returns

• Dec 15, 2025
• Admin

A recurring deposit account, commonly known as RD, is one of the most popular saving instruments offered by banks, post offices, and other financial institutions in India. It is designed for individuals who want to develop a habit of regular saving and earn a guaranteed return on their investments. This guide will cover everything you need to know about recurring deposit accounts – from how they work, their benefits, interest rates, and tax implications to who should invest in them.

What is a Recurring Deposit Account?

A recurring deposit account is a type of fixed-income investment where an investor deposits a fixed amount of money every month for a pre-determined tenure. The amount can be as low as ₹100 in some banks and can go up to several thousands or even lakhs. The tenure typically ranges from 6 months to 10 years, and the interest rate is pre-decided at the time of opening the account.

Unlike a fixed deposit, where you deposit a lump sum amount at once, a recurring deposit allows you to invest in small installments. This feature makes it ideal for salaried employees, students, or anyone with a regular income. At maturity, the investor receives the total amount invested along with interest earned.

How Does a Recurring Deposit Work?

The process is simple. You choose the monthly deposit amount and the tenure. The bank then deducts this amount from your savings account automatically every month, or you can deposit it manually. The amount earns interest at a fixed rate, and the interest is compounded quarterly.

For example, if you open an RD with ₹5,000 per month for 24 months at an interest rate of 6.5 percent per annum, the bank calculates interest on each installment for the remaining tenure until maturity. The first installment earns interest for the entire 24 months, while the last installment earns interest only for one month.

At maturity, you receive the sum of all installments plus the interest earned.

Benefits of Opening a Recurring Deposit Account

A recurring deposit account offers several benefits that make it a preferred choice among conservative investors.

1. Regular Savings Habit

RD accounts encourage financial discipline. By committing to a fixed monthly investment, you develop the habit of saving regularly.

2. Low Risk

Unlike equity markets or mutual funds, recurring deposits are not subject to market fluctuations. The interest rate is fixed at the time of opening the account, which ensures guaranteed returns.

3. Flexibility in Tenure and Amount

You can choose a tenure that suits your financial goal, whether short-term or long-term. The monthly installment can also be set as per your budget.

4. Compounded Interest

Since the interest is compounded quarterly, you earn more over time compared to a simple savings account.

5. Easy Premature Withdrawal

Most banks allow premature closure of RD accounts, though a small penalty may apply. This feature ensures liquidity in case of emergencies.

6. Loan Facility

Some banks offer loans or overdrafts against RD accounts. This can be helpful if you need funds without breaking the RD.

Types of Recurring Deposit Accounts

There are several types of RD accounts to suit different investor needs.

Regular RD Account

This is the standard recurring deposit where you deposit a fixed sum monthly for a chosen tenure.

Flexible RD Account

In this type, you can deposit varying amounts each month, subject to a minimum and maximum limit. This is suitable for people with variable incomes.

Senior Citizen RD

Banks offer higher interest rates for senior citizens, making this an attractive option for retirees.

NRE/NRO RD Account

Non-Resident Indians can also invest in RDs through NRE or NRO accounts, depending on the source of income.

RD for Minors

Parents or guardians can open RD accounts on behalf of minors to build a corpus for education or future expenses.

Interest Rates on Recurring Deposit Accounts

Interest rates on RD accounts vary from bank to bank and are revised periodically. They usually range between 5 percent and 7.5 percent per annum. Public sector banks, private banks, post offices, and small finance banks may all offer different rates.

Senior citizens generally get an additional 0.25 to 0.75 percent over the regular rates. It is always a good idea to compare rates across banks before investing.

Tax Implications of Recurring Deposit Accounts

The interest earned on recurring deposits is fully taxable under the Income Tax Act. It is added to your total income and taxed according to your income tax slab.

Banks deduct TDS (Tax Deducted at Source) at 10 percent if the total interest earned in a financial year exceeds ₹40,000 (₹50,000 for senior citizens). If your total income is below the taxable limit, you can submit Form 15G or 15H to the bank to avoid TDS deduction.

How to Open a Recurring Deposit Account

Opening an RD account is simple and can be done online or offline.

1. Online Method
    
   • Log in to your net banking or mobile banking account.
   • Select the option to open a recurring deposit.
   • Enter the monthly deposit amount, tenure, and choose your savings account for auto-debit.
   • Confirm the details, and the RD account is created instantly.
      
2. Offline Method
    
   • Visit the bank branch with identity proof, address proof, and a photograph.
   • Fill out the RD application form.
   • Choose your monthly deposit amount and tenure.
   • Submit the form along with the first installment.
      

Once the RD is opened, the bank will deduct the monthly amount automatically on the chosen date.

Who Should Open a Recurring Deposit Account?

A recurring deposit account is suitable for:

• Salaried individuals who want to save a fixed amount every month.
• Students who wish to save pocket money over time.
• Parents who want to create a future education fund for their children.
• Retired individuals who prefer guaranteed returns.
• Risk-averse investors looking for a safe investment option.

Things to Keep in Mind Before Opening a Recurring Deposit Account

While RDs are simple to operate, you should keep a few things in mind:

• Penalty for Missed Installments: Banks charge a penalty for late payments or missed installments.
• Premature Withdrawal Penalty: If you close the RD before maturity, you may lose some interest.
• Tax Deduction: Unlike PPF or ELSS, RD investments do not qualify for tax deductions under Section 80C.
• Fixed Rate: The interest rate is locked at the time of opening, so if rates go up later, you may miss out on higher earnings.

Advantages Over Other Savings Options

Compared to a savings account, an RD offers a higher interest rate. Compared to a fixed deposit, it allows gradual investment instead of a lump sum. Compared to market-linked products like mutual funds, RDs are risk-free and provide assured returns.

Limitations of Recurring Deposit Accounts

• The returns may not beat inflation in the long run.
• They are not tax-efficient as the interest earned is fully taxable.
• The returns are fixed, so you cannot take advantage of rising interest rates during the tenure.

Best Practices for Maximizing Returns from RD

• Choose the maximum tenure only if you are comfortable with the interest rate offered.
• Compare rates across banks and post offices.
• Set up automatic payments to avoid missing installments.
• Avoid premature withdrawals to maximize interest earnings.

Future of Recurring Deposit Accounts

With the increasing digitization of banking services, recurring deposits are now easier to manage than ever. Many fintech apps and banks offer automated reminders, flexible deposits, and instant account opening, making RDs a convenient option for young investors as well.

FAQs on Recurring Deposit Account

Q1. What is the minimum amount required to open an RD account?
The minimum amount varies by bank but usually starts from ₹100 or ₹500 per month.

Q2. Can I change the installment amount during the tenure?
In a regular RD, you cannot change the installment amount. However, you can opt for a flexible RD if you need that feature.

Q3. Is the interest on RD taxable?
Yes, the interest earned on RD is taxable as per your income tax slab.

Q4. Can I open multiple RD accounts?
Yes, you can open multiple RD accounts for different tenures and amounts.

Q5. What happens if I miss an installment?
Banks may charge a penalty for missing an installment, and it could also reduce your maturity amount.

Q6. Can NRIs open RD accounts?
Yes, NRIs can open NRE/NRO recurring deposits with banks in India.

Q7. What is the penalty for premature closure?
The bank deducts a small penalty, usually 1 percent from the applicable interest rate, for premature closure.

Q8. How is the maturity value calculated?
Maturity value is calculated based on monthly installments, tenure, and compound interest applied quarterly.

Q9. Are RD accounts safe?
Yes, RDs are considered very safe as they are offered by regulated banks and financial institutions.

Q10. Can I get a loan against my RD?
Yes, most banks offer loans or overdraft facilities against RD accounts, usually up to 80-90 percent of the deposit amount.