.png)
RD Calculator
What is a Recurring Deposit (RD)?
A Recurring Deposit (RD) is an investment tool that allows individuals to make regular monthly deposits and earn a fixed interest rate on them. It's an ideal way to build a savings habit and accumulate a significant corpus over a period of time.
Key Features of RD
RDs are popular due to their simple and effective features:
- Fixed Monthly Payments: You invest a fixed sum of money every month for the entire tenure.
- Fixed Tenure: The tenure for an RD typically ranges from 6 months to 10 years.
- Fixed Interest Rate: The interest rate is fixed at the time of opening the account and does not change, guaranteeing your returns. Interest is typically compounded quarterly.
Taxation on RD Interest
The interest earned from a Recurring Deposit is taxable. It is added to your annual income and taxed according to your income tax slab. If the total interest earned in a financial year exceeds ₹40,000 (for general citizens), the bank will deduct Tax at Source (TDS).
RD Investment Strategy
To make the most of your RD investment:
- Be Consistent: The core benefit of an RD comes from making regular, disciplined monthly payments.
- Choose the Right Tenure: Align your RD tenure with your financial goals, whether it's for a down payment, a vacation, or any other short-to-medium-term objective.
- Compare Interest Rates: Different banks may offer slightly different interest rates, so it's wise to compare before you invest.
Understanding the RD Calculation Formula
The maturity value for an RD with quarterly compounding is calculated using the formula for the future value of an annuity.
- M = Maturity Amount
- P = Monthly Installment
- r = Annual Rate of Interest
- t = Tenure in Years
This calculator uses a precise iterative method based on this principle to ensure accuracy.