Final value after maturity
RD Calculator - Discover the Power of Recurring Deposits
To facilitate small savings and build regular savings habits, recurring deposits are one of the best savings instruments. While it is similar to fixed deposits, you need to make monthly deposits in the RD account. Since the deposits are made monthly, the interest calculation and maturity amount also depend on the same, this can be easily ascertained with the help of the recurring deposit calculator.
So, this article will talk about recurring deposits in detail and how you can make use of the calculator to calculate the interest you earn and the maturity amount of the RD account.
What is RD?
Recurring Deposits can be defined as continuing investments. In Recurring deposits, you have to deposit monthly and the interest is calculated as the deposited amount grows. it is to facilitate small money saving plan and inculcate savings habits in individuals even with the limited disposable amount.
Recurring deposits are risk-free investment instruments where you earn a particular interest on the accumulated and the capital also remains secure on maturity, you get the amount deposited plus the interest you have earned on the same. The interest on RD depends on the repo rate and also the bank you have your RD account with. You can easily calculate the interest you can earn on your RD with the rd interest calculator.
Usually, the interest rate on RD carries from 3.5% to 7.5% while the senior citizens earn a bit higher interest rate. For senior citizens, the rate gets hiked by 0.25% to 1% as well. The compounding frequency of the interest on recurring deposits is quarterly. The first quarter starts from April to June, and the last quarter is thus January to March.
Recurring deposits are for all whether you are an individual, HUF, company or corporate, NRI or resident, government organisation or local authorities, minor above the age of ten or minor below the age of ten years, who will need a legal guardian for opening account are eligible for the scheme.
How is Recurring Deposit interest calculated?
Since the account holder deposits a monthly amount into the RD account but the compounding frequency is quarterly, RD interest is calculated using both simple interest and compound interest formulas.
The formulae for the maturity amount of RD are as follows
RD Maturity amount (M) = [P*(1+i/n)^(n*1/t) ] + [P*(1+i/n)^(n*1/t)] +......
monthly deposit amount
compounding frequency which will be 4 as RD interest gets compounded quarterly
interest on RD in decimals
tenure of investment in months
Let’s understand this with the help of an example –
Suppose you have opened an RD account in your bank and you are depositing Rs. 1000 every month and you want to hold it for 10 years. The interest rate you are getting at present is 7% p.a. So,
RD Maturity amount = [P*(1+0.07/4)^(4*1/120)] + [P*(1+0.07/4)^(4*2/120)] +.....
= Rs. 1.74 lakhs.
As you can see, the calculation of recurring deposits maturity amount is quite tough and it is difficult to do manually, so using a recurring deposit calculator can be the wisest solution for calculating your returns from RD.
Benefits of RD
Tax Implications on RD
The interest you earn on your recurring deposit account is taxable. Moreover, there is no tax exemption for the investment/ deposits made into the RD account under section 80C as well. Also, if the interest amount earned from recurring deposits in a year by an individual goes above Rs. 40000 (in the case of senior citizens it is Rs. 50000), then there will be a TDS implication too. It will be levied at the rate of 10% as per current TDS rates.
Thus, if you are considering recurring deposits for tax-saving purposes, then you shouldn’t. These deposits are mainly for building savings and investment habits and earning regular interest on your deposits and for wealth accumulation over the long-term.
So, if you are thinking of opening a recurring deposit account in your bank, before clicking on the open account tab, check the amount you need to deposit to accumulate a certain amount you require in the future or check for how long you need to stay invested and you can do all these within a blink of an eye with the recurring deposit calculator.
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RD Calculator FAQs
Is there any minimum or maximum limit on RD deposits?
The minimum amount with which you can start an RD account is Rs. 100 while there is no cap on the number of deposits.
What is the minimum tenure for RD investment?
The minimum tenure that most of the banks have is 6 months or 12 months. However, the longer you invest, the more you can accumulate.
Can I withdraw from my RD account anytime?
Yes, you can withdraw as per premature withdrawal regulations but it can lead to a loss of the interest earned and also penalty charges can be there.
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