RD Calculator

A recurring deposit and a fixed deposit of the same total value do not pay the same interest. The reason is timing, and it is worth understanding before you decide which one to open.

Every instalment has its own clock

Deposit 5,000 a month for three years at 7%. Total deposited is 1,80,000; maturity value is 2,00,686.49, so interest is 20,686.49 — about 11.5% of what you paid in.

The engine does not apply one formula to the whole pot. It treats each of the 36 instalments as a separate small deposit and compounds it quarterly for however many months remain after it is paid:

Maturity = Σ  P × (1 + r/4)^(4 × months remaining ÷ 12)

The first instalment sits for 36 months and grows by a factor of 1.2314. The final instalment sits for one month and grows by 1.0058 — it earns about 29 rupees. Averaged across the schedule, your money is invested for roughly half the term, which is exactly why the yield looks thin next to a fixed deposit.

The comparison people get wrong

Putting the same 1,80,000 into a fixed deposit for three years at 7% earns 41,659.08 — double the recurring deposit's interest, because the entire sum compounds for the full three years. That does not make the recurring deposit a worse product. It makes it a different one: it is for money you do not have yet. Comparing an RD against an FD you could not have funded is a comparison against something that was never on the table.

The right comparison is against the alternatives for the same monthly cash flow — another recurring deposit at a better rate, or a monthly investment plan with market risk and no guarantee.

Practical failure modes

• Missed instalments. Banks typically charge a penalty per missed month and may close the account after repeated defaults. The projection assumes an unbroken run of payments.
• Tax deducted at source. The interest shown is gross. Recurring deposit interest is taxable as income and is subject to deduction at source once it crosses the statutory threshold.
• Early closure. Closing before maturity generally reattributes the interest to the rate for the period actually served, less a penalty. The maturity figure assumes the account runs to term.
• Compounding convention. Quarterly compounding is the standard Indian bank practice. If your bank's terms differ, so will your maturity value.

Choosing a tenure

Longer tenures raise the average time each rupee stays invested, so the interest share climbs. At 6.5% over five years, 5,000 a month deposits 3,00,000 and matures at 3,54,954.10 — interest of 54,954.10, or 18.3% of deposits, against 11.5% for the three-year run above. The trade is liquidity: that money is committed, and pulling it early costs you the penalty rather than the projection.

Companion calculators

For a single lump sum in the same product family, use the FD calculator. For a market-linked monthly instalment instead of a guaranteed one, use the SIP calculator. To see the effect of switching compounding frequency, the compound interest calculator lets you vary it directly.