RD Calculator

RD interest is calculated using the formula M = R × [((1 + i)^n − 1) / (1 − (1 + i)^(−1/3))], where R is the monthly deposit, i is the quarterly interest rate (annual rate ÷ 400), and n is the total number of quarters (months ÷ 3). Each monthly deposit earns interest compounded quarterly from the month it is deposited until the maturity date. Deposits made earlier earn interest for longer, which is why the balance grows faster toward the end of the tenure.

It depends on your goal and risk tolerance. An RD is a guaranteed bank deposit with a fixed interest rate — your maturity amount is known upfront, capital is safe, and returns are predictable but modest (typically 6-7.5%). A SIP invests in mutual funds, which are market-linked — long-term equity SIPs have historically averaged around 12% but returns vary year to year and capital is at risk. Both share the same mechanic (fixed monthly contribution that compounds), but with very different risk-return profiles. For short-term goals (1-3 years) or money you cannot afford to lose, an RD is safer. For long-term wealth building (10+ years), a SIP in diversified equity funds has historically outperformed an RD by a wide margin.

Yes, most banks allow premature withdrawal of an RD, but with a penalty — typically the bank pays 1-2% lower than the original RD rate for the period the deposit stayed with the bank. Some banks may also disallow partial withdrawals, requiring you to close the RD entirely. If you stop making monthly deposits, some banks let you continue with a reduced amount, while others may convert it to a savings deposit and pay only savings-account interest. Read your bank's RD terms carefully before opening an account.

RD interest is fully taxable as "Income from Other Sources" and added to your total income. Banks deduct TDS at 10% if the total RD interest across all your RDs with that bank crosses ₹40,000 in a financial year (₹50,000 for senior citizens). If your total income is below the basic exemption limit, you can submit Form 15G (or 15H for seniors) to avoid TDS. You still need to declare the RD interest in your income tax return and pay tax at your slab rate — TDS at 10% is only a partial collection, not the final tax liability.