RD Calculator

Monthly in, quarterly compounded

An RD has a mismatch built in. You pay every month, the bank compounds every quarter, and the last instalment has been in the account for one month when the RD matures. That is why a plain compound interest formula gets it wrong, and why the bank’s calculator, this one and the post office’s agree only if they handle the mismatch the same way.

The inputs: monthly instalment, rate, tenure in years plus any extra months (a 5-year-6-month RD is 5 and 6). The rate is the FD rate for the same tenure at almost every bank, so if you have the FD card you have the RD rate. Post office RD is a single product: five years, 6.7% a year for the quarter this page was checked, reviewed by the Finance Ministry every quarter along with PPF and the other small savings rates.

The conversion the calculator makes is from a quarterly rate to a monthly-equivalent one, so that each instalment can be grown for exactly the months it was in:

i_monthly = (1 + r/4)^(1/3) - 1
M = sum over every instalment of R × (1 + i_monthly)^(months remaining)

At 6.5%, the quarterly rate is 1.625% and the monthly-equivalent works out to 0.5388%. The first instalment of a 60-month RD grows for 60 months, the second for 59, down to the last for one.

₹5,000 a month for five years, instalment by instalment

The default is ₹5,000 a month at 6.5% for 5 years.

Total deposited	₹3,00,000
Maturity value	₹3,54,954
Interest earned	₹54,954
Instalments	60
Effective annual rate	6.66%

The effective annual rate is what 6.5% compounded quarterly is actually worth, and it is the same number the FD calculator shows for a 6.5% FD, because the rate is the same. The interest is not, and that is the next section.

Shorter and longer versions of the same ₹5,000:

Tenure	Deposited	Maturity	Interest
1 year	₹60,000	₹62,143	₹2,143
2 years	₹1,20,000	₹1,28,425	₹8,425
3 years	₹1,80,000	₹1,99,122	₹19,122
5 years	₹3,00,000	₹3,54,954	₹54,954
5 years at 6.7% (post office)	₹3,00,000	₹3,56,829	₹56,829

The one-year row is the one people find disappointing. ₹60,000 in, ₹2,143 out, because the average rupee was in the account for about six months at 6.5% a year. That is 3.6% on the total deposited, and it is correct.

Bank statements sometimes show a few rupees more or less than this page. SBI and most PSU banks calculate from the instalment date and round the quarterly interest; some private banks credit interest at calendar quarter ends regardless of when you started. If you pay late in the month the bank may also count the instalment from the next month. A difference under ₹20 on this example is convention, not an error.

Why the RD earns half of what the FD does

Put ₹3,00,000 into an FD at the same 6.5% for the same five years and the interest is ₹1,14,126. The RD earns ₹54,954. Same total, same rate, same tenure, less than half the interest.

Nothing is being skimmed. In the FD the whole ₹3 lakh earns from day one; in the RD ₹5,000 earns from day one, ₹5,000 more from month two, and the last ₹5,000 earns for a single month. On average each rupee is invested for about half the tenure, so it earns about half the interest. The RD is for money you do not have yet. Comparing it with an FD you could not have funded on day one is the wrong comparison, but knowing the gap stops you feeling cheated when the maturity advice arrives.

It also settles what to do with a lump sum you already hold: never an RD. If a relationship manager suggests “an RD for discipline” when you have ₹3 lakh sitting in savings, the FD is ₹59,172 better over five years.

Post office RD rules and the missed-instalment penalty

The post office RD (the National Savings Recurring Deposit) is five years and nothing else. Minimum ₹100 a month, in multiples of ₹10, no maximum. Pay by the 15th if the account was opened on or before the 15th, otherwise by month end. At maturity you can extend for another five years, and after three years you can close early at the post office savings rate, which is 4%, so do not.

A missed instalment at the post office costs ₹1 for every ₹100 of the instalment per month of default: ₹50 on the ₹5,000 example, each month, paid along with the arrears. Miss four in a row and the account is marked discontinued; you get two months from the fifth default to revive it, and if you do not, it stops earning until it is closed. A small monthly amount you will actually pay beats a large one you will skip in December. The post office also allows one loan of up to 50% of the balance after twelve instalments, at 2% over the RD rate.

Banks are more relaxed and more varied. Most charge a penalty in the same ₹1 to ₹2 per ₹100 per month range, some waive the first miss, and the usual rule is that six consecutive missed instalments allow the bank to close the RD. Premature closure at a bank is on the same terms as an FD: interest at the rate for the tenure actually completed, less a penalty of 0.5 to 1 percentage point, and nothing at all if you close inside a month at most banks.

Tax works exactly as it does for an FD. Interest is taxable at your slab rate as it accrues, and for FY 2025-26 a bank deducts 10% TDS once the interest it pays you in a year crosses ₹50,000 (₹1 lakh for a senior citizen). The default RD never gets near that; a ₹25,000-a-month RD in its fifth year would. Wherever the RD is held, the interest is taxable in your hands and turns up in your AIS, so put it in the ITR even when nothing was deducted.

RD against SIP, FD and a savings goal

A SIP at an assumed 12% turns the same ₹5,000 a month over five years into ₹4,12,432, against the RD’s ₹3,54,954. The RD figure is guaranteed and DICGC-insured up to ₹5 lakh per bank. The SIP figure is an assumption, and over a five-year window an equity fund can finish below what you put in. School fees due in 2029, a wedding with a date, next year’s insurance premium: RD. A goal ten years out: SIP, and the RD comparison stops mattering.

If what you actually know is the target and the date, the savings goal calculator solves for the monthly amount instead of the maturity. For a long, tax-free version of the same discipline with a 15-year horizon, ₹12,500 a month before the 5th into PPF is the closer comparison, and the PPF interest is not taxed at all. And for a lump sum that already exists, the FD calculator and the ₹59,172 above.