Question 1

How is RD maturity amount calculated?

Accepted Answer

RD maturity is calculated by summing the compound interest earned by each monthly deposit from its deposit date to the maturity date. Indian banks use quarterly compounding, so each instalment grows at the quarterly rate (annual rate / 400) for the remaining quarters. The formula accounts for each deposit separately, which is why the total is slightly more than simple interest on the average balance.

Question 2

What is the current RD interest rate in India?

Accepted Answer

Major Indian banks offer RD rates between 5.5-7.5% depending on tenure and customer type. SBI offers 6.0-6.8%, HDFC Bank 6.0-7.3%, and India Post RD offers 6.7%. Senior citizens typically get an additional 0.25-0.50%. Small finance banks may offer 7-8.5% on RDs.

Question 3

Is RD interest taxable?

Accepted Answer

Yes, RD interest is taxable at your income tax slab rate. Banks deduct TDS at 10% if total annual interest across all deposits exceeds ₹40,000 (₹50,000 for senior citizens). Unlike PPF, RD does not qualify for any tax deduction under Section 80C. Report your total RD interest in your ITR under "Income from Other Sources".

Question 4

Can I break my RD before maturity?

Accepted Answer

Yes, most banks allow premature RD closure with a penalty — typically 1-2% reduction in the applicable interest rate. The penalty varies by bank and tenure. Some banks do not charge a penalty for premature closure after a minimum period (usually 3-6 months). Missing a monthly instalment may also result in penalties or account deactivation after consecutive misses.

Question 5

Which is better: RD or SIP?

Accepted Answer

RD offers guaranteed returns (5.5-7.5%) with zero market risk — best for short-term goals (1-3 years) and conservative savers. SIP in mutual funds offers potentially higher returns (10-15% in equity) but with market risk — better for long-term goals (5+ years). For monthly savings discipline, both work equally well. Use RD for emergency fund building and SIP for long-term wealth creation.

Question 6

What is the minimum and maximum RD amount?

Accepted Answer

Most banks require a minimum monthly RD deposit of ₹100-1,000. There is generally no maximum limit for RDs in most banks, though India Post limits RD to specific amounts. The deposit amount is fixed at the time of account opening and cannot be changed during the tenure. You can open multiple RD accounts with different amounts if needed.

Question 7

What is the difference between RD and FD?

Accepted Answer

RD requires monthly deposits and is ideal for building savings over time, while FD requires a one-time lump sum deposit. For the same rate and tenure, FD earns more total interest because the full principal compounds from day one. RD is better for people who want to save a fixed amount every month. Both use quarterly compounding in Indian banks and offer similar interest rates.

RD Calculator — Recurring Deposit Maturity Calculator