Frequently Asked Questions
What is a Recurring Deposit (RD)? +
A Recurring Deposit (RD) is a savings scheme offered by banks and post offices where you deposit a fixed amount every month for a chosen tenure. At maturity, you receive the total deposited amount plus interest. It is ideal for salaried individuals who want to save regularly.
How is RD interest calculated? +
RD interest is calculated using the formula: M = R × [(1 + i)^n – 1] / (1 – (1+i)^(–1/3)), where M = Maturity Amount, R = Monthly Deposit, i = Rate/400 (quarterly compounding), n = number of quarters. Banks compound RD interest quarterly in India.
Is RD interest taxable? +
Yes. RD interest is fully taxable as per your income tax slab. TDS (Tax Deducted at Source) is applicable if total interest in a financial year exceeds ₹40,000 (₹50,000 for senior citizens). You can submit Form 15G/15H to avoid TDS if your total income is below the taxable limit.
What is the minimum RD amount? +
Most banks allow RD starting from ₹100/month (Post Office RD) or ₹500–₹1,000/month (private banks). There is no maximum limit. The tenure typically ranges from 6 months to 10 years.
RD vs FD — which is better? +
Both offer similar interest rates. FD is better if you have a lump sum to invest. RD is better if you want to save in small monthly installments. For building a savings habit, RD wins. For maximising interest on existing money, FD wins.
Read our detailed RD vs FD comparison →
Can I withdraw RD before maturity? +
Yes, premature withdrawal is allowed but attracts a penalty of 0.5%–1% on the applicable interest rate. Some banks don't allow premature withdrawal for the first 3 months. Post Office RDs cannot be withdrawn before 3 years.