A recurring deposit (RD) lets you save a fixed amount every month and earn FD-like interest. Enter your monthly instalment, rate and tenure to see what you will get at maturity.
How RD interest is calculated
Each monthly instalment earns compound interest (compounded quarterly) for the time it stays invested. The first instalment earns interest for the full tenure, the last one for just a month. The maturity value is the sum of all of them:
M = Σ R × (1 + r/4)^(4 × months_left/12)
where R is the monthly deposit and r is the annual rate.
Example
₹5,000 a month for 5 years (60 months) at 6.7% grows to about ₹3,56,800. You deposit ₹3,00,000 and earn roughly ₹56,800 in interest.
Post office RD
- Tenure: 5 years (extendable by 5 more).
- Rate: 6.7% for October–December 2026, compounded quarterly.
- Minimum ₹100 a month, no upper limit.
- A loan of up to 50% of the balance is allowed after 12 instalments.
RD tips
- Set the RD date a day or two after your salary credit so instalments never bounce.
- Missed instalments usually attract a small penalty – and too many can close the RD.
- RD interest is taxable at your slab rate, like FD interest.
RD maturity table (₹5,000 per month)
| Tenure | Deposited | At 6.5% | At 7.0% | At 7.5% |
|---|---|---|---|---|
| 1 year | ₹60,000 | ≈ ₹62,140 | ≈ ₹62,310 | ≈ ₹62,480 |
| 2 years | ₹1,20,000 | ≈ ₹1,28,430 | ≈ ₹1,29,100 | ≈ ₹1,29,780 |
| 3 years | ₹1,80,000 | ≈ ₹1,99,120 | ≈ ₹2,00,690 | ≈ ₹2,02,270 |
| 5 years | ₹3,00,000 | ≈ ₹3,54,950 | ≈ ₹3,59,660 | ≈ ₹3,64,450 |
Worked example
You deposit ₹2,000 a month for 12 months at 7%:
- The first instalment earns interest for 12 months: 2,000 × (1 + 0.07/4)^4 ≈ ₹2,144.
- The last instalment earns interest for 1 month: 2,000 × (1 + 0.07/4)^(1/3) ≈ ₹2,012.
- Adding all 12 instalments gives about ₹24,930 – ₹930 of interest on ₹24,000 deposited.
When an RD makes sense
- Saving for a known expense within 1–3 years: a trip, a gadget, school fees, insurance premiums.
- Building the habit of saving a fixed amount each month.
- Parking money you can’t afford to see fall in value, unlike equity funds.
Bank RD vs post office RD
| Bank RD | Post office RD | |
|---|---|---|
| Tenure | 6 months to 10 years | 5 years |
| Rate | Varies by bank | 6.7% (Oct–Dec 2026) |
| Safety | DICGC insurance up to ₹5 lakh | Backed by the Government of India |
| Flexibility | Higher – choose your tenure | Lower – fixed 5 years |
Tax on RD interest
RD interest is taxed at your slab rate each year, and banks deduct TDS when total interest crosses the annual threshold. Submit Form 15G/15H if your income is below the taxable limit.
Real-life scenarios
- Saving for a trip: Arjun wants ₹1.2 lakh for a holiday in 2 years. A ₹4,700 monthly RD at 7% matures to about ₹1.21 lakh.
- Insurance premium: Meera pays a ₹36,000 annual premium every March. A 12-month RD of ₹2,900 started in April covers it with interest to spare.
- Emergency fund builder: Starting with ₹10,000 a month for 3 years at 7% builds about ₹4.01 lakh – a solid buffer for most families.
- Children’s savings: Parents open a 5-year post office RD of ₹2,000 a month for school fees, building about ₹1.42 lakh at 6.7%.
RD vs SIP for monthly saving
Both let you save a fixed amount every month. An RD gives a known maturity amount and suits goals within a few years. A SIP in equity mutual funds can earn more over 5+ years but its value can fall in the short term. A common approach is RDs for short-term goals and SIPs for long-term ones.
Related calculators
- FD calculator – lump-sum fixed deposits
- Step-up SIP calculator – long-term investing
- PPF calculator – tax-free long-term savings
FAQs
Can I change the monthly amount of an RD?
Generally no – the instalment is fixed. Open a second RD if you want to save more.
What if I miss an RD instalment?
Banks charge a small penalty per missed instalment. Several consecutive misses can lead to the RD being closed early.
Is RD better than SIP?
RDs give guaranteed returns; SIPs in equity funds can grow more over long periods but go up and down. Many people use an RD for goals under 3 years and SIPs for longer ones. Compare with the SIP calculator.
Can I close an RD early?
Yes, but banks usually pay a lower rate on premature closure.