A Recurring Deposit (RD) is a monthly savings scheme offered by Indian banks with a fixed interest rate and guaranteed returns. Use our free RD Calculator India to project maturity value, interest earned, and compare RD vs FD returns. Part of our Complete Salary & Tax Guide for India.
What Is a Recurring Deposit?
RD lets you deposit a fixed amount every month for a chosen tenure. The bank pays a fixed interest rate — typically 6.5–7.5% depending on bank and tenure — and returns your deposits plus interest at maturity. It is ideal for disciplined monthly saving without market risk.
How RD Interest Is Calculated
Most Indian banks use quarterly compounding. Each quarter, interest is calculated on the running balance (including prior interest). The standard formula:
M = R × [(1 + i)^n − 1] / [1 − (1 + i)^(−1/3)]
Where R = monthly deposit, i = quarterly rate (annual rate ÷ 4 ÷ 100), n = number of quarters. Example: ₹5,000/month at 7% for 2 years → maturity approximately ₹1,29,099.
RD vs FD — Which Is Better?
If you have a lump sum, FD typically earns slightly more because the full amount compounds from day one. RD is better when you save from monthly income — it enforces discipline and beats a savings account. Compare both with our FD vs SIP comparison.
RD vs SIP — Risk vs Return
RD offers guaranteed, fixed returns but interest is fully taxable. SIP in equity mutual funds is market-linked with potentially higher long-term returns and more tax-efficient LTCG treatment on equity — but with volatility and no guarantee.
TDS on RD Interest
Banks deduct 10% TDS when total interest across all deposits at that bank exceeds ₹40,000/year (₹50,000 for senior citizens). Submit Form 15G or 15H if your total income is below the taxable limit to avoid upfront TDS deduction.
Current RD Rates (June 2026)
Rates change frequently — verify on the bank website before opening. Rough ranges: SBI 6.5–7.0%, HDFC 7.0–7.4%, ICICI 6.9–7.25%. Small finance banks may offer higher rates for select tenures.
Frequently Asked Questions
How is RD interest calculated in India?
RD interest in India is calculated using quarterly compounding. The bank applies interest at one-quarter of the annual rate every three months on the running balance. The standard formula used is M = R × [(1+i)^n − 1] / [1 − (1+i)^(-1/3)], where R is monthly deposit, i is quarterly interest rate, and n is number of quarters.
Is RD interest taxable in India?
Yes — RD interest is fully taxable as "Income from Other Sources" at your applicable slab rate. Banks deduct 10% TDS if your total interest (across all deposits at that bank) exceeds ₹40,000 per year (₹50,000 for senior citizens). Submit Form 15G or 15H to avoid TDS if your total income is below the taxable limit.
Which is better — RD or FD?
If you have a lump sum available, FD typically gives slightly higher returns since the full amount earns interest from day one. If you want to save regularly from monthly income, RD is ideal — it enforces discipline and earns better returns than a regular savings account. For long-term wealth creation with market-linked returns, SIP in equity mutual funds historically outperforms both.
What is the minimum deposit in an RD?
Most Indian banks allow RD deposits starting from ₹100-₹500 per month, with no maximum limit. The minimum tenure is typically 6 months, and some banks offer RD tenures up to 10 years.