RD Calculator: How Recurring Deposit Returns are Calculated [2026]

A Recurring Deposit (RD) is one of the simplest and most disciplined ways to build savings in India. If you do not have a lump sum to invest in a Fixed Deposit but can set aside a fixed amount every month, an RD is the perfect vehicle. It offers guaranteed returns similar to an FD, but with the convenience of monthly contributions. In this guide, we will explain how RD interest is calculated, compare bank rates for 2026, discuss taxation, and help you decide whether an RD, FD, or SIP is right for you.

What is a Recurring Deposit?

A Recurring Deposit is a term deposit offered by banks and post offices where you deposit a fixed amount every month for a predetermined tenure. At the end of the tenure, you receive the total deposited amount plus the interest earned. Think of it as a systematic savings plan with a guaranteed return.

Here are the key features of a Recurring Deposit:

• Minimum deposit: Most banks allow RDs starting from as low as ₹100 per month. Some banks have a minimum of ₹500 or ₹1,000.
• Tenure options: RDs can be opened for periods ranging from 6 months to 10 years, in multiples of 3 months. The most common tenures are 1 year, 2 years, and 5 years.
• Fixed monthly amount: You commit to depositing the same amount every month. Missing a payment may attract a penalty.
• Guaranteed returns: The interest rate is fixed at the time of opening and does not change during the tenure.
• Safety: Like FDs, bank RDs are insured up to ₹5 lakh per depositor per bank by the DICGC.
• Loan facility: Some banks offer a loan against your RD, typically up to 80-90% of the deposited amount.
• Premature closure: Allowed with a penalty, usually 0.5% to 1% reduction in the applicable interest rate.

RDs are ideal for salaried individuals, students, homemakers, or anyone who wants to build a savings corpus through small, regular monthly contributions without taking any market risk.

RD Interest Formula Explained

RD interest is compounded quarterly by most banks. The formula to calculate the maturity value of an RD is:

M = P × [((1 + r/n)^(n×t) - 1) / (1 - (1 + r/n)^(-1/3))]

Where:

• M = Maturity amount
• P = Monthly deposit amount
• r = Annual interest rate (in decimal, e.g., 7% = 0.07)
• n = Compounding frequency per year (quarterly = 4)
• t = Tenure in years

A simpler approximation often used for quarterly compounding is:

M = P × N + P × N × (N+1) / (2 × 12) × (r/100)

Where N is the total number of monthly deposits. However, the exact formula accounts for quarterly compounding and gives a slightly higher amount.

Worked Example

Let us calculate the maturity amount for an RD of ₹5,000 per month at 7% annual interest for 5 years (60 months), compounded quarterly.

The total interest earned is ₹58,616 on a total deposit of ₹3,00,000. This means your monthly ₹5,000 contributions grow to approximately ₹3,58,616 in 5 years. The effective yield works out to about 3.9% per annum on the total deposited amount, which makes sense because each monthly installment earns interest for a different duration.

Why Quarterly Compounding Matters

Since RD interest is compounded quarterly, each monthly deposit within a quarter earns slightly different interest. Deposits made at the start of a quarter earn more than those made at the end. This is why the exact formula is preferred over simple approximations. The difference is usually small (a few hundred rupees over 5 years) but becomes more significant for larger monthly deposits or longer tenures.

RD Interest Rates 2026 — All Banks

RD interest rates are generally the same as FD rates for the corresponding tenure. Below are the approximate RD rates offered by major banks in India as of mid-2026 for general citizens (senior citizens get 0.25% to 0.75% extra):

Bank	1 Year	3 Years	5 Years
SBI	6.80%	7.00%	6.75%
HDFC Bank	6.85%	7.10%	7.00%
ICICI Bank	6.90%	7.15%	7.00%
Axis Bank	6.85%	7.10%	7.00%
Kotak Mahindra	6.75%	7.00%	6.75%
PNB	6.80%	7.00%	6.75%
Post Office RD	6.50%	6.50%	6.50%

Note: Post Office RD has a fixed rate announced by the government each quarter and is currently at 6.5% for all tenures. Post Office RD tenure is fixed at 5 years. Bank RD rates are indicative and may change. Always verify with the bank before opening an RD.

Tax on RD Interest

RD interest is fully taxable under the head "Income from Other Sources." Here is what you need to know:

TDS on RD Interest

Banks deduct TDS under Section 194A if your total interest income from all deposits (FD + RD) exceeds:

• ₹40,000 per year for general citizens (₹50,000 for senior citizens).
• TDS is deducted at 10% if PAN is provided, or 20% if PAN is not provided.

Unlike FDs, there is no Section 80C tax benefit on RDs. The 5-year tax-saving FD qualifies for 80C, but a 5-year RD does not. This is an important distinction when choosing between FD and RD.

How to Avoid TDS on RD

If your total income is below the taxable limit, submit Form 15G (below 60 years) or Form 15H (senior citizens) to the bank. Even if TDS is deducted, you can claim a refund while filing your ITR if your actual tax liability is lower. Remember, RD interest is added to your income and taxed at your applicable slab rate — if you are in the 20% or 30% bracket, you will owe additional tax beyond the 10% TDS.

FD vs RD vs SIP — Which is Better?

The choice depends on your cash flow, risk appetite, and financial goals:

Feature	Fixed Deposit	Recurring Deposit	SIP (Mutual Fund)
Investment type	Lump sum	Monthly installments	Monthly installments
Returns	6.5%–7.5% (guaranteed)	6.5%–7.5% (guaranteed)	10%–14% (market-linked)
Risk	Nearly zero	Nearly zero	Moderate to high
Liquidity	Premature withdrawal with penalty	Premature withdrawal with penalty	Redeemable anytime (exit load may apply)
Tax benefit	5-year FD qualifies under 80C	No 80C benefit	ELSS funds qualify under 80C
Discipline	One-time investment	Enforced monthly savings	Auto-debit option available
Best for	Lump sum idle money	Building savings habit, no lump sum	Long-term wealth creation (5+ years)

Choose RD if: You do not have a lump sum, want guaranteed returns, and prefer enforced monthly discipline. RDs are excellent for building an emergency fund or saving for a specific goal like a vacation or down payment.

Choose FD if: You already have a lump sum and want guaranteed returns with no monthly commitment.

Choose SIP if: You have a 5+ year horizon, can tolerate market volatility, and want potentially higher returns. Over long periods, equity SIPs have historically delivered 12-14% annualized returns, significantly outpacing RD returns.

Tips to Maximize RD Returns

1. Start early in the month: Since RD interest is compounded quarterly, depositing at the start of each month (rather than the end) gives your money slightly more time to earn interest.
2. Choose longer tenures: Longer tenures (3-5 years) typically offer higher interest rates than shorter ones. A 5-year RD at 7% will earn more per rupee than a 1-year RD at 6.8%.
3. Compare banks: Small finance banks and some private banks offer 0.25% to 0.75% higher rates than public sector banks. Check AU Small Finance Bank, Equitas, and Ujjivan for competitive RD rates.
4. Opt for Post Office RD for safety: Post Office RD is backed by the Government of India and offers a decent 6.5% rate. It is a good option for those who prioritize absolute safety over marginally higher bank rates.
5. Do not miss payments: Most banks charge a penalty of ₹1 to ₹2 per ₹100 per month for missed RD installments. Set up an auto-debit instruction to avoid missing payments and incurring penalties.
6. Consider FD if you get a lump sum: If you receive a bonus or windfall, consider moving to an FD instead of continuing the RD. FD rates are the same, but a lump sum earns more because the entire amount earns interest from day one.