How to Calculate RD Returns (And How It Compares to FD & SIP)
A Recurring Deposit lets you invest a fixed amount every month and earn interest similar to an FD. But the RD interest calculation is more complex because each monthly deposit earns interest for a different duration. Our free RD Calculator handles the math instantly, but understanding the formula helps you compare it with other options.
The RD Interest Formula (Quarterly Compounding)
Indian banks typically use quarterly compounding for RDs. The maturity value is the sum of the future values of each monthly deposit. Mathematically, M = P × Σ (1 + r/4)^(k/3), where P is the monthly deposit, r is the annual rate, and k is the number of months remaining for each instalment. Because early deposits compound for longer, they contribute more interest than later ones. That’s why an RD of ₹5,000 per month for 5 years at 6.5% yields slightly less than a lump‑sum FD of the same total amount, even at the same rate—but it’s perfect for those who want to build savings gradually.
Step‑by‑Step: Use the RD Calculator
- Open the RD Calculator. Enter your monthly deposit, the annual interest rate, and the tenure in months.
- Click “Calculate.” You’ll see the maturity value, total amount deposited, and interest earned.
- Experiment with different tenures to find the sweet spot for your goal.
RD vs. FD vs. SIP at a Glance
RD and FD both offer guaranteed returns, but FD requires a one‑time investment. SIP in mutual funds has higher return potential but comes with market risk. For a risk‑free short‑term goal (1‑5 years), RD is a solid choice. For longer goals, an SIP might beat both in post‑tax returns. The RD calculator gives you the exact numbers so you can compare.
Frequently Asked Questions
Can I withdraw RD money early?
Yes, but banks charge a penalty and reduce the interest rate, similar to an FD.
Is RD interest taxable?
Yes, it’s added to your income and taxed at your slab rate. No TDS for interest below ₹40,000 p.a.
Can I change the monthly deposit amount later?
No, the amount is fixed at the start. You’d need to open a new RD to adjust the contribution.
What is the minimum tenure for an RD?
Usually 6 months, but this varies by bank. Our calculator works for any tenure.
Is it free and private?
Yes, the tool runs entirely in your browser; no data is collected.
Disclaimer: This is general information and not financial advice. Actual returns may vary based on bank policies.
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