Is RD interest taxable?

Yes. RD interest is fully taxable as per your income slab. Banks deduct TDS at 10% if annual interest exceeds ₹40,000 (₹50,000 for seniors). Unlike PPF or SSY, RD has no EEE status.

Does RD beat inflation?

Rarely. At 6.5% nominal and 6% CPI, the real pre-tax yield is ~0.47%. After a 30% income tax on interest, the effective real return can be negative. Our calculator shows the exact real yield based on your inputs.

What happens if I miss an RD installment?

Banks typically charge a penalty of ₹1.50–₹2 per ₹100 per month on the missed amount. More importantly, the missed principal earns no interest for that period, compounding the loss. Use the missed installment field above to quantify the impact.

RD vs FD — which is better?

FD offers slightly higher rates for the same tenure since you're depositing all at once. RD is better if you don't have a lump sum and want to build savings month by month. For identical amounts and tenures, FD accumulates more due to the full principal earning interest from day one.

RD vs SIP — which gives better returns?

SIP in equity funds has historically delivered 12–14% CAGR vs RD's 6–7%, but with market risk. For a guaranteed return on short-to-medium goals, RD is appropriate. For 5+ year horizons, equity SIPs typically outperform significantly in real terms.

RECURRING DEPOSIT

Monthly discipline. Real yield — not just nominal.

Your bank says 6.5%. After 6% inflation, your real purchasing-power gain can drop below 0.5%. See the actual number, plus what one missed month costs you. Guide: RD TDS, taxable interest, and real yield

Nominal & inflation-adjusted yield Missed instalment impact 100% browser math, no sign-up

Calculate RD Reality check

Deposit Inputs

Monthly Deposit (₹) Most RDs start from ₹500/month

₹500 ₹50k

Interest Rate (% p.a.) Typical bank RD: 5.5% – 7.5%

1% 12%

Tenure (Months) Longer tenure improves interest capture

6 mo 240 mo

Missed Installments Skipped months reduce principal and growth

Reality Check

Results

Total Deposited

Cash paid in

Maturity Value

At end of tenure

Interest Earned

Missed Impact

Value lost to missed months

Real Yield Nominal vs Inflation-Adjusted

Nominal and purchasing-power-adjusted

After % inflation:

Growth Path

What is an RD?

A Recurring Deposit (RD) is a fixed-income savings product offered by banks and post offices. You invest a fixed amount every month at a fixed interest rate for a predetermined tenure and receive the maturity amount (deposit + interest) at the end.

RDs are the disciplined savings version of an FD — ideal when you don't have a lump sum but can commit to monthly deposits. The critical number to watch isn't the 6.5% nominal rate; it's the post-tax, post-inflation real yield — which SmartFinance computes above.

RD advantages — and the real-return caveat

Builds saving discipline: Auto-debit monthly ensures consistent contribution without emotional friction.
Predictable returns: Rate is locked at inception — no market volatility.
Flexible tenures: 6 months to 10 years — suited for goal-based short-to-medium savings.
Capital protection: Insured up to ₹5L per depositor per bank under DICGC.
Real-return caveat: RD interest is fully taxable. After 30% income tax and 6% CPI, a 6.5% RD's real after-tax return can be near zero or negative — making it a wealth-preserver, not a wealth-builder.

How RD interest works

Each installment earns separately — the first deposit earns interest for the full tenure; the last earns interest for just one month.
Compounded quarterly — most bank RDs compound interest quarterly (not annually like PPF), improving effective yield slightly.
TDS applies — if total annual interest from all deposits across the bank exceeds ₹40,000, TDS at 10% is deducted. Submit Form 15G/15H to avoid TDS if your income is below the taxable threshold.
Premature closure penalty — typically 0.5–1% below the applicable rate for the period held.
Missed installments — attract a penalty and reduce the effective yield. Even two missed months can measurably dent your maturity — use the field above to quantify.

FAQ

Recurring Deposit — questions worth asking

Does an RD beat inflation in India?: Rarely. At 6.5% nominal, after 30% income tax the post-tax rate is ~4.55%. Subtract 6% CPI and your real return is approximately −1.45%. Use the inflation input on the calculator above to see the exact real maturity value in today's rupees for your specific scenario.
Is it better to open an RD before or after April 1?: Unlike PPF, RD interest doesn't have a monthly minimum-balance window. However, opening at the start of a financial year helps with TDS tracking since the ₹40,000 TDS threshold resets on April 1. Strategically, start the RD when you have the monthly cash flow — timing within the year matters less for RDs than for PPF.
RD vs SIP — which should I choose?: For guaranteed capital and a sub-3-year horizon, RD wins on predictability. For 5+ year goals, equity SIPs have historically delivered 3–5× the real return of RDs. The SmartFinance approach: use RD for near-term targets (emergency fund topup, vacation, down payment) and SIP for long-term wealth building.
What is the maximum RD amount per month?: There is no regulatory cap on monthly RD deposits. You can open multiple RD accounts. The only constraint is that TDS kicks in when annual interest from all accounts at a single bank exceeds ₹40,000.
Post Office RD vs Bank RD — which is better?: Post Office RD offers a 6.7% rate (as of 2025) with sovereign guarantee and no TDS on interest. For investors in the 30% bracket who want to avoid TDS complexity, Post Office RD can be slightly more efficient. Bank RDs offer higher rates in some cases (especially small finance banks) but carry DICGC insurance up to ₹5L.