RD Calculator Guide: How Recurring Deposit Returns Are Calculated

A Recurring Deposit (RD) is for people who don't have a lump sum to invest but can commit to a fixed monthly amount. It's the bank-FD equivalent of SIP investing — but with a guaranteed, fixed interest rate instead of market-linked returns.

The RD Maturity Formula

RD interest is calculated on each monthly installment separately (since each deposit sits in the bank for a different length of time), then summed:

M = P × n + P × n(n+1)/2 × r/12

M = Maturity value, P = Monthly installment, n = number of months, r = annual interest rate

Worked Example

Monthly deposit: ₹5,000 | Rate: 7% p.a. | Tenure: 3 years (36 months)

  • Total deposited: 5,000 × 36 = ₹1,80,000
  • Interest earned (approx, quarterly compounded): ₹20,952
  • Maturity value ≈ ₹2,00,952

Note: banks use quarterly compounding in practice, so exact figures vary slightly by bank — use our calculator for precise numbers matching your bank's method.

RD Maturity at Different Tenures (₹5,000/month @ 7%)

TenureTotal DepositedInterest EarnedMaturity Value
1 year₹60,000₹2,275₹62,275
3 years₹1,80,000₹20,952₹2,00,952
5 years₹3,00,000₹59,748₹3,59,748

RD vs FD vs SIP: Choosing the Right One

AspectRDFDSIP (Equity)
Investment styleMonthly, fixed amountOne-time lump sumMonthly, fixed amount
ReturnsFixed, guaranteed (~6.5-7.5%)Fixed, guaranteed (~6.5-7.5%)Market-linked (~10-14% long-term avg, not guaranteed)
RiskZero (bank-backed)Zero (bank-backed)Moderate to high (market risk)
Best forShort-term goals, no lump sumLump sum you already haveLong-term wealth building (5+ years)

For goals within 1-3 years (like a vacation, gadget, or emergency buffer), RD's guaranteed returns make sense. For goals 7+ years away (retirement, child's education), SIP historically outperforms RD by a wide margin due to market compounding — despite the added risk.

What Happens If You Miss an RD Installment?

Banks typically charge a small penalty (₹1-2 per ₹100 per month delayed) for missed installments. Missing multiple installments can lead to account closure by the bank, so RD works best when you're confident about consistent monthly cash flow.

Frequently Asked Questions

Q: Is RD interest taxable?Yes, fully taxable at your income slab rate, same as FD interest — and subject to TDS if it crosses the threshold across your deposits with that bank.
Q: Can I increase my RD amount midway?No, the monthly amount is fixed for the entire tenure when you open the RD. To invest more, you'd need to open a new RD.
Q: What's the minimum RD tenure?Most banks offer RD tenures from 6 months up to 10 years, in multiples of 3 months.
Q: Can I withdraw RD before maturity?Yes, with a penalty on the interest rate (similar to premature FD withdrawal), varying by bank.

Calculate your exact RD maturity value. Use our free RD Calculator →

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