Disciplined Savings
Bank Recurring Deposits (RD)
Verified Indian financial mathematics, statutory regulations, and step-by-step actionable breakdowns.
Expected Yield6.5% - 7.2% p.a.
Lock-In Tenure6 Months to 10 Years
Risk LevelZero Risk
Tax StatusTaxable as Slab
Overview & Statutory Background
A Recurring Deposit (RD) is a specialized bank deposit that allows individuals to deposit a fixed amount every month for a pre-decided tenure while earning fixed deposit interest rates compounded quarterly. It is ideal for accumulating lump sums for short-term annual goals.
Key Features & Operational Guidelines
Fixed monthly installment auto-debited on your chosen date
Flexible tenures from 6 months up to 120 months (10 years)
Fixed interest rate locked for the entire tenure at the time of opening
Insured under RBI's DICGC up to ₹5 Lakhs per bank
Loan/overdraft facility available against accumulated RD balance
Who is Eligible to Invest?
- •All resident Indians, minors, and senior citizens with a bank savings account
Indian Taxation Breakdown
| Stage | Tax Treatment |
|---|---|
| Initial Investment | No tax deduction under Section 80C. |
| Interest & Returns | Taxable as per individual income tax slab; subject to TDS if interest exceeds ₹40k/yr. |
| Maturity / Withdrawal | Principal is return of capital. |
Advantages & Limitations
Key Advantages (Pros)
- ✓Inculcates disciplined monthly savings habit without market volatility
- ✓Locks in current interest rates for the entire tenure against future rate cuts
- ✓Low starting threshold (start with just ₹500 - ₹1,000 per month)
- ✓Guaranteed maturity corpus
Important Limitations (Cons)
- ✕Interest is fully taxable at your peak income slab rate
- ✕Cannot alter monthly deposit amount once RD is created
- ✕Missing monthly installment may attract minor penalty charges
Bank Recurring Deposits (RD) FAQs
Yes, Indian banks compute RD interest using quarterly compounding based on the number of quarters each specific monthly installment remains invested.
Calculate Compound Returns
Use our interactive calculators to simulate exact growth schedules for this asset.