1. What is the Recurring Deposit Formula?

The Recurring Deposit (RD) formula calculates the maturity amount for a fixed monthly deposit scheme with compound interest. It helps investors understand the returns they can expect from their regular savings.

2. How Does the Calculator Work?

The calculator uses the RD formula:

Where:

• \( M \) — Maturity amount (currency units)
• \( P \) — Monthly deposit amount (currency units)
• \( N \) — Number of months (unitless)
• \( R \) — Annual interest rate (%)

Explanation: The formula calculates the total principal amount plus the compound interest earned on regular monthly deposits.

3. Importance of RD Calculation

Details: Accurate RD calculation helps individuals plan their savings, compare investment options, and make informed financial decisions for future goals.

4. Using the Calculator

Tips: Enter monthly deposit amount in currency units, number of months (must be at least 1), and annual interest rate in percentage. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is compound interest calculated in RDs?
A: Interest is compounded quarterly in most RD schemes, and the formula accounts for the compounding effect on regular monthly deposits.

Q2: Are there any penalties for premature withdrawal?
A: Most banks charge a penalty for premature withdrawal of RD, which typically reduces the interest rate by 1-2%.

Q3: Can the monthly deposit amount be changed during the tenure?
A: Generally, the monthly deposit amount is fixed at the beginning and cannot be changed during the RD tenure.

Q4: How does RD compare to fixed deposits?
A: RDs allow regular monthly deposits while FDs require a lump sum investment. RDs are better for building savings habit while FDs may offer slightly higher rates for large amounts.

Q5: Are RD returns taxable?
A: Yes, interest earned on RDs is taxable as per your income tax slab rate, and TDS may be deducted by the bank.