RD Calculator

How to use this calculator

1. Enter the monthly instalment.
2. Enter the interest rate the bank quoted.
3. Enter the tenure in years, plus any additional months.

How the calculation works

An RD is awkward because two different periods are in play: you deposit monthly, but banks compound quarterly. The two do not line up, so the quarterly rate has to be converted into a monthly-equivalent one:

i_monthly = (1 + r/4)^(1/3) − 1

Maturity is then the sum of every instalment grown for its own remaining term:

M = Σ  R × (1 + i_monthly)^(months remaining)

This calculator sums the instalments individually rather than using the textbook closed form. It is obviously correct, handles partial years without a special case, and matches bank statements closely.

A worked example

₹5,000 a month for 5 years at 6.5%.

The quarterly rate is 1.625%, which converts to a monthly-equivalent 0.5388%. The first instalment grows for 60 months; the last for one.

Maturity value	₹3,54,954
Total deposited	₹3,00,000
Interest earned	₹54,954
Effective annual rate	6.66%

Why an RD earns so much less than an FD

This is the thing worth understanding, because it surprises almost everyone.

Depositing ₹5,000 a month for five years puts in ₹3,00,000 — the same total as a ₹3,00,000 FD. But an FD of ₹3,00,000 at 6.5% for five years earns about ₹1,14,000 in interest, while the RD earns ₹54,954. Less than half.

The reason is simple: in an FD the entire sum earns interest from day one. In an RD the first instalment earns for 60 months and the last earns for one, so the average rupee is invested for roughly half the tenure.

This is not a defect. An RD is for money you do not have yet — it converts a monthly surplus into a lump sum. Comparing its return to an FD you could not have funded on day one is comparing two different situations.

What happens if you miss an instalment

Most banks charge a small penalty, typically ₹1 to ₹2 per ₹100 per month of delay, and the maturity value falls because that money was not working.

Missing six consecutive instalments usually allows the bank to close the account prematurely and pay out at the applicable lower rate. If cash flow is uncertain, a smaller instalment you can definitely sustain beats a larger one you cannot.

Tax

RD interest is fully taxable at your slab rate, and it accrues annually rather than only at maturity. TDS applies once interest crosses ₹40,000 in a year (₹50,000 for senior citizens).

Many RD holders are caught out by this, because a small monthly deposit feels like saving rather than investing. For someone in the 30% bracket, a 6.5% RD returns about 4.6% after tax.

RD or SIP?

They answer different questions, and choosing on expected return alone is the mistake.

	RD	Equity SIP
Return	~6–7%, guaranteed	~10–13% historically, no guarantee
Risk of loss	None (within DICGC limits)	Real, and can persist for years
Right horizon	1–5 years	7+ years
Right use	A known expense on a known date	Long-term wealth building

An RD is right for next year’s school fees, an insurance premium, or a planned purchase. A SIP is right for a goal a decade away. Using a SIP for money you need in eighteen months is how people end up selling at the worst moment.

Common mistakes to avoid

Expecting FD-like returns. As above — the average rupee is invested half as long, so expect roughly half the interest.

Choosing a tenure longer than the goal. Breaking an RD early means interest recalculated at the rate for the period actually completed, plus a penalty of 0.5 to 1 percentage point. Match the tenure to when you need the money.

Assuming partial withdrawal is available. Many banks disallow it entirely, offering only full closure or a loan against the deposit.

Forgetting the DICGC limit. ₹5,00,000 per depositor per bank, covering principal and interest across all your accounts at that bank combined.

When this calculator is not the right tool

For a lump sum rather than monthly deposits, use the FD calculator. For a long-term tax-free option with a similar discipline, PPF is the closer comparison. And for working out what monthly amount reaches a specific target by a specific date, the savings goal calculator solves the equation the other way round.