How a recurring deposit grows
An RD takes a fixed amount every month for a set number of months, from 6 to 120 in this calculator. Each instalment earns interest only from the month it is paid, so the first one works for the full tenure and the last one for a single month.
Indian banks compound RD interest quarterly. For each instalment the calculator works out P × (1 + r/4)^(4 × t), where t is the time that instalment stays deposited, in years, and then adds the results together. The post office recurring deposit also compounds quarterly.
Example: ₹5,000 a month for a year at 7%
Twelve instalments of ₹5,000 put ₹60,000.00 into the account. At 7% the RD matures at ₹62,310.66, so the interest earned is ₹2,310.66. The first instalment grows for 12 months and the twelfth for one, which is why the interest is far less than 7% of ₹60,000.
Keep the same ₹5,000 going for 120 months and the total deposited is ₹6,00,000.00, while the maturity value reaches ₹8,68,508.67. Interest of ₹2,68,508.67 shows how much a long tenure lets compounding work on the earliest instalments.
Missed instalments and closing early
Banks expect each instalment on its due date. A late payment usually attracts a small penalty, and repeated misses can lead the bank to close the account before maturity. The charges are set out in the RD terms, so read them before you sign up.
RBI's deposit directions count a recurring deposit as a term deposit, so the premature withdrawal rules for FDs apply here too. Closing early earns the rate for the period actually completed, usually less a penalty under the bank's policy, which must be disclosed when the account is opened.
RD or FD for the same goal
An RD fits a salary that arrives monthly; an FD fits a lump sum you already hold. If you have the full amount today, an FD at the same rate earns more, because all of it earns interest from the first day. Many banks extend their senior citizen rates to RDs, so ask for the higher rate if you qualify.
Tax and insurance on RD interest
RD interest is taxable each year at your slab rate. The Income-tax Act, 2025 counts recurring deposits as time deposits, so a bank adds your RD interest to your FD interest when it checks the TDS limit. In November 2026 that limit is ₹50,000 a tax year, or ₹1,00,000 for senior citizens, and above it the bank deducts 10%.
Form 121, which took over from Forms 15G and 15H, stops the deduction if your total tax will be nil. DICGC insurance of up to ₹5 lakh per depositor in each bank covers RD balances along with your savings and fixed deposits there.