A Recurring Deposit is the simplest savings habit you can build — deposit a fixed amount every month, earn guaranteed interest, and collect a lump sum at the end. The calculator below uses quarterly compounding, which is what SBI, HDFC, ICICI, Axis, Post Office, and almost every Indian bank and small finance bank applies on RDs.
How RD maturity is calculated
Unlike an FD where you deposit once, an RD involves a new deposit every month. Each instalment earns interest for a different number of months — your first deposit earns for the full tenure, your last one earns for just one month. Banks compute maturity by treating each monthly instalment as a mini-FD and summing them up.
The formula for each instalment:
A_i = P × (1 + r/400)^(remaining months / 3)
Where:
- P = monthly deposit amount
- r = annual interest rate (%)
- remaining months = tenure − month number + 1
- Division by 3 converts months to quarters (since quarterly compounding means 4 compounding periods per year)
The total maturity = sum of all monthly instalment maturity values.
Worked example: ₹10,000/month for 2 years at 7%
| Metric | Value |
|---|---|
| Monthly deposit | ₹10,000 |
| Tenure | 24 months |
| Interest rate | 7% p.a. |
| Total deposited | ₹2,40,000 |
| Maturity amount | ₹2,56,608 (approx.) |
| Interest earned | ₹16,608 |
The effective yield is slightly below 7% because the later instalments earn interest for fewer months — that’s the mathematical reality of a monthly deposit product vs. a lump-sum FD.
Current RD rates in India (April 2026)
| Bank | 1-year RD | 2-year RD | 3-year RD |
|---|---|---|---|
| SBI | 6.80% | 7.00% | 6.75% |
| HDFC Bank | 6.60% | 7.00% | 7.00% |
| ICICI Bank | 6.70% | 7.00% | 7.00% |
| Post Office RD | 6.70% | — | — |
| AU Small Finance Bank | 7.50% | 8.00% | 8.00% |
| Equitas Small Finance | 7.25% | 8.00% | 8.25% |
Small finance banks typically offer 50–100 bps more than large banks. Post Office RD (5-year) is a popular safe option at 6.70%, with sovereign guarantee.
RD vs FD — which should you choose?
Choose RD if: You don’t have a lump sum ready and need to save from monthly income. It’s essentially forced savings with a guaranteed return.
Choose FD if: You already have a corpus. A ₹2.4 lakh FD at 7% for 2 years earns more than a ₹10,000/month RD at the same rate because all ₹2.4 lakh starts compounding from day one.
The interest difference is small in absolute rupees for most investors, but the discipline an RD builds — committing to a monthly transfer — is the real value for those who would otherwise spend the money.
Frequently asked questions
Is TDS deducted on RD interest?
Yes, from FY 2025-26 onwards, TDS under Section 194A applies on RD interest above ₹40,000 per year per bank (₹50,000 for senior citizens). Rate is 10% with PAN, 20% without PAN. If your RD interest is below the threshold, no TDS is deducted at source, but you still need to declare the interest in your ITR under “Income from Other Sources.”
Can I break an RD before maturity?
Yes, but you pay a penalty — typically 0.5–1% deducted from the applicable rate for the period held. Post Office RDs can be closed after 3 years (not before). If you break a 3-year RD after 1 year, you’d get the 1-year rate minus the penalty, not the 3-year rate you opened it at.
What is Post Office RD?
Post Office Recurring Deposit is a government-backed savings scheme with a 5-year tenure (extendable). Interest rate is set quarterly by the Finance Ministry and is currently 6.70% p.a. (Q1 FY 2025-26). It’s available at all post offices and through India Post Payments Bank. No TDS is deducted at source, but the interest is taxable.
Can I start an RD online?
Yes — all major banks (SBI, HDFC, ICICI, Axis, Kotak) let you open and manage RDs through net banking or mobile apps. India Post offers online RD via the IPPB app. Minimum monthly deposit is typically ₹100 (Post Office), ₹500–₹1,000 (private banks), ₹1,000 (SBI).
Is RD interest taxable?
Yes, fully. RD interest is added to your income and taxed at your slab rate — there’s no deduction like PPF. If you’re in the 30% bracket, a 7% RD yields an after-tax return of ~4.9%. For high-income investors, debt mutual funds or tax-free bonds may be better. For those in the 0–5% bracket (income below ₹7 lakh under the new regime), RD is effective because most of the 7% return is kept.
Sources
- RBI Guidelines on Interest Rates on Deposits (Master Direction)
- India Post – Post Office Recurring Deposit scheme terms
- Finance Act 2025: TDS threshold amendments (Sec 194A)
- SBI, HDFC, ICICI official rate cards (April 2026)