RD Calculator

RD Calculator — The Monthly Savings Tool Most People Underestimate

A Recurring Deposit does one thing that no other investment product in India does quite as cleanly: it turns a monthly saving habit into a guaranteed, interest-bearing corpus with zero market risk and zero decision fatigue. You pick an amount, you pick a tenure, and the bank does the rest. The question is whether the returns justify using an RD over alternatives — and the answer depends entirely on your goal and timeline.

How RD Interest Actually Works

Each monthly instalment you deposit earns interest from its date of deposit until maturity. Earlier instalments earn more total interest because they stay invested longer — your first deposit earns interest for the full tenure, while your last deposit earns interest for just one month. This is why the maturity value of an RD is not simply your total deposits multiplied by the interest rate — it's a cumulative calculation across 60 separate deposits, each earning a different amount of interest.

Interest on RDs compounds quarterly, the same as FDs. This matters when comparing rates across products — a 6.7% RD compounding quarterly produces a slightly higher effective yield than a 6.7% product compounding annually.

Current Rates — June 2026

Post Office RD: 6.7% per annum, compounded quarterly — backed by sovereign guarantee of the Government of India, the safest RD option available.

Small Finance Banks offer the highest RD rates currently — Suryoday SFB at 8.25%, Jana SFB at 8.0%, ESAF SFB at 7.75% — all covered under DICGC insurance up to ₹5 lakh. The rate advantage over large banks is 100-150 basis points, significant for disciplined savers contributing ₹20,000-50,000 per month

Private banks: IDFC First at 7.3%, Yes Bank at 7.25%, IndusInd at 7.0%. Public sector banks: SBI at 6.5-6.8%, Bank of Baroda at 6.7%

For most salaried investors prioritising safety, the Post Office RD and large public sector banks are the default choice. For those willing to accept slightly higher counterparty risk within the DICGC insurance limit, Small Finance Banks offer meaningfully better rates on the same product.

A Real Numbers Example

₹3,000 per month for 5 years at 6.7% per annum produces a maturity amount of approximately ₹2.1 lakh. You deposit ₹1.8 lakh total — the ₹30,000 difference is your interest income over 5 years, taxable at your slab rate

At 8.25% from a Small Finance Bank, the same ₹3,000 monthly grows to approximately ₹2.22 lakh at maturity — ₹12,000 more than the Post Office RD for the same deposit and tenure. Over larger monthly amounts the difference compounds meaningfully.

Tax Treatment — What Most People Miss

RD interest is fully taxable as Income from Other Sources at your applicable income slab rate — every year on an accrual basis, not just at maturity. This catches many investors off guard: even though the bank pays you at maturity, the Income Tax Department expects you to declare and pay tax on the interest accruing each financial year

TDS applies at 10% when total interest across all deposits at a bank exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). For Post Office RDs, the TDS threshold is ₹40,000. For most people with modest monthly RDs of ₹5,000-10,000, total annual interest stays below the TDS threshold — but if you have multiple RDs or FDs at the same bank, the combined interest is what counts

If your total income is below the taxable limit, submit Form 15G (or Form 15H for senior citizens) at the start of each financial year to prevent TDS deduction. Note that from April 2026, the new unified Form 121 replaces Form 15G and 15H — same purpose, new form number.

What Happens If You Miss an Instalment

Post Office RD allows up to 4 defaults before the account becomes discontinued. A default penalty of ₹1 per ₹100 applies for each missed month. Most banks allow 3-6 missed payments depending on their policy, after which the RD may be prematurely closed at a penalty rate

Premature closure at most banks carries a penalty of 1-2% reduction on the rate applicable for the actual holding period. If you close a 2-year Small Finance Bank RD after 15 months, you earn the 1-year rate minus the penalty — still better than a savings account, but lower than the planned rate. Factor this into your decision if you're not confident about 5-year liquidity

Loan Against RD — Avoiding Premature Closure

You can borrow up to 80-90% of your accumulated RD balance at your RD rate plus 1-2%. The RD continues to earn interest while you use the loan — the net cost of emergency liquidity is only the 1-2% spread. For Post Office RD, the loan facility is available after 12 months of uninterrupted deposits, up to 50% of the amount deposited to date

This is a significantly better option than premature closure when you need temporary funds — your long-term interest earnings stay intact while you access liquidity at a very low effective cost.

RD vs SIP: Choosing the Right Monthly Investment

RD and SIP serve different risk appetites and time horizons. RD is the closest fixed-income equivalent to SIP — same monthly contribution habit, guaranteed vs market-linked returns. For goals within 3-5 years where you cannot afford any capital loss — a house down payment, children's school fees, an upcoming wedding — RD's guaranteed return and fixed maturity value make it the right choice. For goals 7+ years away where higher returns justify short-term volatility, equity SIP historically outperforms RD significantly. Many financial planners recommend running both simultaneously — RD for near-term goals, SIP for long-term wealth

Use FinBuddy's RD Calculator to model your monthly contribution, preferred bank or Post Office, and tenure to see your exact maturity value and understand the tax impact before opening an account.