Monthly Investment

₹ 500

₹ 15,00,000

Expected Return Rate (p.a)

1%

15%

Time Period (in months)

1 month

120 months

Investment Amount

Estimated Profits

Investment Amount

1,20,000

Estimated Profits

1,20,000

Total Value

1,20,000

Recurring Deposits offer an attractive interest rate that varies from one bank to another just like Fixed Deposits. The calculation of RDs is complex and hence RD Calculators are used by banks to calculate the amount to be received at the time of maturity.

RD Calculator helps in the computation of returns in a hassle-free manner within a few seconds. It is quite easy when compared to manual RD Calculation as all you have to do is put in some details related to your RD on the calculator, and it reflects the amount it will accrue after maturity.

M = R[(1+i)^n-1]/(1-(1+i)^(-1/3) ) where,

M = Maturity Value

R = Monthly Installment

n = Number of quarters

I = Rate of interest/400

Here is an example for easy understanding:

Let us say Sudhanshu starts investing ₹10,000 in a recurring account for a tenure of 1 year (4 quarters).

The interest rate that his rd account offers is 8%. Now let us use the above formula to calculate the final maturity amount.

Maturity amount = 10,000*(1+ (0.08/4)) ((4*12)/12) = ₹ 10,824.32

Maturity amount = 10,000*(1+ (0.08/4)) ((4*11)/12) = ₹ 10,753.10

Similarly we need to calculate for all remaining months till 1 month

Caculation for 1st month look like this = 10,000*(1+ (0.08/4)) ((4*1)/12) = ₹ 10,626.58

If you sum like above for all the months the total maturity amount that you will arrive at is ₹ 1,25,293

- RD can be used as collateral for taking loans. You can take up to 80-90% loans on your RD amount
- Premature withdrawals are allowed under RD. However, this may come with a small penalty
- RD schemes allow for a higher rate of interest (usually 0.5% more) for senior citizens
- Minors can also open RD accounts under the supervision and guardianship of their parents
- The tenure is also flexible and you can choose from 7 days to 10 years depending on your convenience
- RD schemes allow you to save money on a regular basis and the minimum deposit amount can be as low as RS. 10

- Similar to other personal tax-saving and investment instruments, Recurring Deposit schemes also attract taxes. A TDS of 10% is deducted on the returns accrued from an RD if the total interest exceeds Rs. 10,000 in a single financial year.
- Compare this to the SIP scheme and you can see that SIPs are more beneficial in the long term. Since long-term gains from equity are tax-free, any SIP which invests in ELSS (Equity Linked Mutual Funds) is also tax-free after one year.

RBI interest rate policy is the primary factor that affects the interest rate (including recurring deposit interest rates). RBI revises the interest rates every 3 months. RBI considers many factors like inflation, country economy stability, etc., before revising the rates. In case of an economic downturn, the RBI reduces the interest rate. this is bad for recurring deposit investors but good for businesses. In the case of good economic conditions, it will increase the rate. This scenario is good for RD depositors because they get more returns because of high rates. Banks have the freedom to set their interest rate for their customers. Banks, however, cannot offer the rate they wish due to competition and interest rate policy.

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