Use our online recurring deposit calculator to compute investment returns and the maturity value from recurring deposit schemes in India
Investment Amount:
Estimated Return:
Maturity Amount:
*Investing in the securities market carries risk. Please do your own due diligence before investing.
Recurring deposits serve as an investment avenue where individuals can save money on a monthly basis. They install financial discipline by encouraging regular investment habits. Most banks in India offer recurring deposit accounts similar to fixed deposit accounts, with the primary difference being that fixed deposits involve lump sum deposits, whereas recurring deposits involve fixed monthly deposits.
Recurring deposits provide competitive interest rates that vary among banks, akin to fixed deposits. Due to the complexity of recurring deposit calculations, banks utilize RD calculators to determine the maturity amount to be received.
The interest on recurring deposits is typically compounded quarterly in most banks, following this formula:
M = R[(1+i)^n-1]/(1-(1+i)^(-1/3) ) where,
Consider an investor, Ravi 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
The interest rate that his rd account offers is 8%. Now let us use the above formula to calculate the final maturity amount.
If you sum like above for all the months the total maturity amount that you will arrive at is ₹ 1,25,293
Why Recurring Deposit is useful?
1. Loan Collateral: RDs can serve as collateral for loans, allowing borrowers to obtain 80-90% of the RD amount as a loan.
2. Premature Withdrawals: RDs permit premature withdrawals, although a small penalty may apply.
3. Higher Interest for Seniors: Senior citizens often enjoy a higher interest rate (usually 0.5% more) on RD schemes.
4. Minor Accounts: Minors can open RD accounts under parental supervision.
5. Flexible Tenure: RDs offer flexibility in tenure, ranging from 7 days to 10 years to suit individual preferences.
6. Regular Savings: RDs facilitate regular savings, with minimum deposit amounts as low as ₹10.
Tax Benefits on Recurring Deposits (RD)
Like other investment instruments, RDs attract taxes. A TDS of 10% is deducted on RD returns exceeding Rs. 10,000 in a financial year. Comparatively, Systematic Investment Plans (SIPs) can be more beneficial in the long term, especially those investing in Equity Linked Mutual Funds (ELSS), as long-term gains from equity are tax-free after one year.