What is a recurring deposit?

Recurring deposit is a type of deposit scheme where you deposit a fixed amount of money on a monthly basis. You earn an interest at a fixed rate on the deposit amount, till the deposit matures. Once the maturity period is over, you will receive the amount at maturity which is a sum of the interest and the deposit amount. One may use an **rd calculator** to compute the amount beforehand.

A recurring deposit calculator takes the following into account –

1. Tenure

The tenure of a recurring deposit usually differs from bank to bank. The minimum and maximum tenure are 6 and 10 months respectively.

2. Interest

The interest earned on the recurring deposit account is based on the duration and the contribution amount of the recurring deposit.

3. Maturity period

On reaching the maturity period, you will get the sum of the principal amount and the interest earned.

Features of Recurring deposits:

1. Collateral for loans

You can use your rd as a collateral for applying for a loan.

2. TDS

Your recurring deposits are eligible for Tax deducted at source or TDS. 10% is deducted if the interest amount on a recurring deposit exceeds Rs 10,000 per annum.

3. Withdrawals before maturity

A penalty is levied if the recurring deposit account is closed before the maturity period is over.

4. Late payments

In some cases, if you miss a monthly payment then a penalty is levied by the bank.

What is a recurring deposit calculator?

A recurring deposit or rd calculator is a tool which can be used to determine the maturity value of a recurring deposit. In a recurring deposit, each month’s deposit earns interest that is different from the other. This is due to the fact that compounding only occurs at the end of the financial quarter and not at the end of a month.

The interest for a recurring deposit is calculated by using the following formula –

Interest on a recurring deposit is calculated on a quarterly basis. The compounding effect takes place only at the end of each quarter. The formula used to calculate recurring deposit is –

M = R [(1+i) n -1]

M= maturity value

R = the monthly installments

i = rate of interest / 400

n = number of quarters

Thus to pick a scheme that meets your requirements, use the recurring deposit emi calculator to calculate the monthly payments and the maturity value.

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