Question 1

What is Recurring Deposit (RD) and how does it work?

Accepted Answer

Recurring Deposit (RD) is a savings scheme where you deposit a fixed amount every month for a chosen tenure (6 months to 10 years). The bank pays interest on your deposits, compounded quarterly. At maturity, you receive all your deposits plus accumulated interest. RD helps build savings discipline with guaranteed returns.

Question 2

How is RD maturity amount calculated?

Accepted Answer

RD interest is compounded quarterly. Each monthly deposit earns interest for the remaining period until maturity. The calculation considers quarterly compounding where each deposit earns compound interest based on how many quarters remain. This is why the maturity amount is higher than simple interest calculation.

Question 3

What is the minimum amount to start an RD?

Accepted Answer

Most banks allow RD starting from ₹100 to ₹500 per month. Post Office RD minimum is ₹100. There is usually no maximum limit, though some banks may have caps. You can choose any amount that fits your budget and increase it in subsequent RDs.

Question 4

What happens if I miss an RD installment?

Accepted Answer

Missing RD installments leads to: (1) Penalty typically ₹1-2 per ₹100 per month delayed, (2) After 4-6 consecutive defaults, RD may be converted to FD at lower rate, (3) Some banks allow 1-2 month grace period. Set up auto-debit to avoid missing payments.

Question 5

Can I withdraw RD before maturity?

Accepted Answer

Yes, premature withdrawal is allowed but with consequences: (1) Interest rate is reduced by 1-2%, (2) Penalty may be charged, (3) You get the reduced amount based on actual tenure. Some banks don't allow withdrawal before minimum period (usually 3-6 months). Loan against RD is a better option to avoid breaking it.

Question 6

Is RD interest taxable?

Accepted Answer

Yes, RD interest is taxable as "Income from Other Sources" at your slab rate. TDS is deducted at 10% if total interest from the bank exceeds ₹40,000/year (₹50,000 for senior citizens). Submit Form 15G/15H to avoid TDS if your income is below taxable limit.

Question 7

RD vs FD - Which is better?

Accepted Answer

FD is better if you have lump sum to invest. RD is better if you want to save from monthly income. FD typically offers slightly higher interest rates. RD builds savings discipline. For same total investment, FD earns more interest as entire amount is deposited upfront.

Question 8

RD vs SIP - Which should I choose?

Accepted Answer

RD: Guaranteed returns, very safe, ~6-7% returns, ideal for short-term goals (1-3 years). SIP: Market-linked, higher risk, potentially ~12-15% returns, ideal for long-term goals (5+ years). Choose RD for capital protection, SIP for wealth creation.

Question 9

What is the maximum tenure for RD?

Accepted Answer

Maximum RD tenure varies: Most banks offer up to 10 years, Post Office RD is 5 years (renewable), Some banks limit to 5 years. Longer tenures earn more interest but lock your money. Consider your financial goals when choosing tenure.

Question 10

Can I get a loan against my RD?

Accepted Answer

Yes, banks offer loans up to 80-90% of RD value at interest rates 1-2% above RD rate. Benefits: (1) RD continues earning interest, (2) Quick processing, (3) Lower rates than personal loans, (4) No need to break RD. Useful for emergencies without losing RD benefits.

Question 11

Do senior citizens get higher RD rates?

Accepted Answer

Yes, most banks offer 0.25% to 0.50% additional interest to senior citizens (60+ years) on RD. Some banks may not offer this benefit on RD (only on FD). Check with your bank for senior citizen RD rates and benefits.

Question 12

Can I increase RD amount during the tenure?

Accepted Answer

Generally, you cannot change the RD amount during the tenure. The monthly deposit is fixed when you open the account. To invest more, you need to open a new RD with higher amount. Some flexi-RD products allow variable deposits, but they're not commonly available.

Feature	RD	FD	SIP
Investment	Monthly fixed	Lumpsum	Monthly flexible
Returns	Guaranteed	Guaranteed	Market-linked
Risk	Very Low	Very Low	Moderate-High
Best For	Regular savers	Lump sum	Wealth creation

RD Calculator

RD Details

Maturity Summary

What is Recurring Deposit (RD)?

Benefits of RD

💰 Start Small

🔒 Guaranteed Returns

📅 Flexible Tenure

🎯 Goal-based Saving

RD vs FD vs SIP

Frequently Asked Questions