What Is a Recurring Deposit?
A Recurring Deposit (RD) is a fixed-income investment product offered by banks and post offices where you invest a fixed amount every month and earn interest compounded quarterly. It is designed for individuals who want to build a savings corpus through regular monthly instalments.
Unlike a Fixed Deposit where you invest a lump sum at once, an RD allows you to contribute modest amounts monthly, making it ideal for salaried individuals and anyone looking to build a saving habit. The minimum monthly deposit at the Post Office is just Rs 100, and most banks accept as little as Rs 500 per month.
RDs are governed by RBI guidelines and offer guaranteed returns irrespective of market movements. The interest rate is fixed at the time of opening the account and remains constant for the entire tenure, making RD one of the safest investment options available in India. Per RBI data, scheduled commercial banks held over Rs 3.5 lakh crore in RD deposits as of March 2025.
RD Formula and Calculation Method
The standard formula for calculating RD maturity in Indian banking uses quarterly compounding. Each monthly deposit earns interest independently from the month it is deposited until the end of the tenure.
M = P x (1 + R/400)^(4 x t1) + P x (1 + R/400)^(4 x t2) + ... + P x (1 + R/400)^(4 x tn)| Variable | Meaning |
|---|---|
| M | Total maturity amount |
| P | Monthly deposit amount |
| R | Annual interest rate (in %) |
| t | Time in years for each deposit |
Worked example: You deposit Rs 5,000 every month for 3 years at an 8% quarterly-compounded rate. The first deposit earns interest for 36 months (3 years), the second for 35 months, and so on. The maturity value is the sum of each deposit with its compounded interest. This calculator performs that series automatically.
RD vs FD: Key Differences
The primary difference between RD and FD is the investment pattern. An FD requires a one-time lump sum deposit, while an RD accepts monthly instalments. Both offer fixed, guaranteed returns and are among the safest fixed-income instruments in India.
| Feature | RD | FD |
|---|---|---|
| Investment pattern | Monthly instalments | One-time lump sum |
| Minimum amount | Rs 100 to Rs 500 per month | Rs 1,000 to Rs 10,000 |
| Interest rate | Slightly lower than FD | Higher than RD typically |
| Compounding | Quarterly (standard) | Quarterly (standard) |
| Tenure range | 6 months to 10 years | 7 days to 10 years |
| Premature closure | Allowed with penalty | Allowed with penalty |
| TDS applicable | Yes, above Rs 40,000 | Yes, above Rs 40,000 |
| Best for | Monthly savers | Lump sum investors |
For salaried individuals with no large lump sum, an RD is the more practical instrument. For those with a significant amount ready to invest, FDs generally offer a slightly higher rate. Many banks offer 0.25% to 0.50% higher rates on FDs compared to RDs for the same tenure. Compare both using Fermor's FD Calculator.
Quarterly Compounding in RD Explained
Quarterly compounding means the interest is calculated and added to the principal once every three months. In RD, this is the standard method prescribed by the Indian Banks Association. The compounding frequency of 4 times per year (N=4) means each monthly deposit earns compound interest that grows faster than simple interest but slower than monthly compounding.
| Compounding Frequency | Formula (for 1 year at 8%) | Effective Annual Rate |
|---|---|---|
| Yearly (N=1) | (1 + 0.08/1)^1 - 1 | 8.000% |
| Half-yearly (N=2) | (1 + 0.08/2)^2 - 1 | 8.160% |
| Quarterly (N=4) | (1 + 0.08/4)^4 - 1 | 8.243% |
| Monthly (N=12) | (1 + 0.08/12)^12 - 1 | 8.300% |
The effective annual rate increases with compounding frequency. Quarterly compounding, which all Indian banks use for RDs, gives an effective rate of 8.243% when the nominal rate is 8%. Over long tenures, this difference compounds significantly. A monthly deposit of Rs 5,000 at 8% for 10 years earns approximately Rs 1,08,000 more than the simple interest equivalent.
RD Taxation: How RD Returns Are Taxed
RD interest is fully taxable as per your income tax slab. Unlike PPF or EPF, RD does not enjoy EEE (Exempt-Exempt-Exempt) status. The interest earned is added to your total income and taxed at your applicable slab rate. No tax deduction under Section 80C is available on the principal amount invested in an RD.
TDS on RD Interest
Banks deduct TDS at 10% if the total interest from all deposits with that bank exceeds Rs 40,000 in a financial year. For senior citizens, the threshold is Rs 50,000. If you have not submitted your PAN to the bank, the TDS rate becomes 20%. The TDS is reflected in your Form 26AS and can be claimed as credit while filing your income tax return.
Tax Planning Tip
If your total income is below the taxable threshold, submit Form 15G (or Form 15H for senior citizens) to the bank at the start of the financial year to avoid TDS deduction. The interest will still be taxable, but you can avoid the upfront deduction and pay any applicable tax at the time of filing. For tax-efficient fixed-income investing, PPF offers EEE status under Section 80C. Use the PPF Calculator to compare.
Current RD Interest Rates in India
RD interest rates are reviewed and updated periodically by banks and the Post Office. These rates are typically 0.25% to 0.50% lower than the corresponding FD rates for the same tenure. Below are indicative rates across major institutions as of mid-2026.
| Institution | Rate (p.a) | Tenure Range |
|---|---|---|
| Post Office RD | 6.7% | 5 years |
| State Bank of India | 5.5 to 7.0% | 1 to 10 years |
| ICICI Bank | 5.5 to 7.25% | 6 months to 10 years |
| HDFC Bank | 5.5 to 7.25% | 6 months to 10 years |
| Axis Bank | 5.5 to 7.5% | 6 months to 10 years |
| Yes Bank | 6.0 to 7.75% | 1 to 10 years |
| AU Small Finance Bank | 7.0 to 9.0% | 1 to 10 years |
| Equitas Small Finance Bank | 7.0 to 8.5% | 1 to 10 years |
Senior citizens typically receive 0.50% to 0.75% higher rates on RDs, similar to FDs. Small finance banks offer higher rates because they need to attract deposits to meet priority sector lending norms under RBI regulations. Per RBI data, small finance banks held approximately Rs 25,000 crore in RD deposits as of Q4 FY25.
Limitations of Recurring Deposits
How to Use This RD Calculator
This calculator is free and requires no sign-up or personal information. Three inputs control the entire calculation:
- Monthly investment: use the slider to set the amount you intend to deposit each month, ranging from Rs 500 to Rs 1,00,000.
- Rate of interest: enter the annual interest rate offered by your bank or the Post Office, adjustable from 1% to 15% in 0.1% steps.
- Time period: choose between years or months using the toggle, then adjust the slider. Quick preset buttons let you switch between 1, 2, 3, 5, 8, and 10-year durations instantly.
The donut chart instantly shows your total principal vs interest split. The year-by-year growth table (expandable by clicking the section below the calculator) shows how the investment builds over each completed year. Click any input value to type an exact number, or use the slider for quick adjustments.
The currency selector on the top right converts all displayed amounts to your preferred currency. Useful for NRI investors who want to see RD returns in their resident currency. The results update in real-time as you adjust any input.
Frequently Asked Questions
Disclaimer: All calculations on this page are indicative only. RD interest rates vary by bank and are subject to change. This calculator uses the standard quarterly compounding formula prescribed by the Indian Banks Association. Actual maturity amounts may differ slightly due to rounding and individual bank policies. This calculator is for educational and planning purposes and does not constitute financial advice. Consult a SEBI-registered investment adviser before making investment decisions.