When it comes to traditional investment options, Fixed Deposits (FDs) are often the most popular choice. But have you heard about Recurring Deposits (RDs)? An RD is a type of term deposit quite similar to FDs. It allows you to deposit a fixed amount of money every month for a set period. In return, the bank pays you interest on your deposits, which is compounded quarterly. At the end of the deposit term, you’ll get back the total amount you deposited, along with the interest earned. RD schemes are offered by both banks and post offices, but how do you choose the right RD scheme? That’s where an RD calculator comes in!
Let us see how this simple online RD interest calculator can help you choose the right online recurring deposit scheme!
Recurring Deposit (RD)
An RD is a popular savings option where you can deposit a fixed amount every month and earn interest. RD interest is generally 4% to 8%, depending on the bank or post office. However, the deposit term can be anywhere from 6 months to 10 years.
Each type of RD has its own benefits and is suited for different individuals. But how do you choose one that can offer you maximum returns?
Let us understand the workings of an online recurring deposit calculator!
What is an RD Calculator?
An RD calculator is an online tool that shows you how much money you’ll have when your recurring deposit matures. You just have to fill in the three details: your monthly deposit amount, the interest rate, and the tenure of your investment.
The calculator shows you the total amount you’ll get back, including all the rd interest earned.
A recurring deposit calculator is your go-to tool for figuring out how much your RD will grow.
Post Office RD Calculator
The Post Office RD calculator helps you quickly figure out how much money you’ll get from your Post Office RD account.
As of January 1, 2024, the post office RD interest rate is 6.7% per annum, compounded quarterly.
- The minimum deposit is ₹100 per month, with no maximum limit.
- Post office RD can be opened by Single adults, joint accounts (up to 3 adults), guardians for minors or persons of unsound mind.
- You can deposit up to 5 years in advance and get rebates for early deposits.
India Post provides various banking and money transfer services, including the National Savings Recurring Deposit Account. If you have an RD account at any post office, you can use post office RD calculator to check how much you’ll earn when your deposit matures.
It’s pretty similar to other RD calculators but uses the interest rates from the post office.
RD Calculator Formula
Curious about how these calculators work?
Here’s the formula they use: A = P*(1+R/N)^(Nt)
- A is the final amount you get
- P is your RD monthly deposit
- R is the annual RD interest rate
- N is how often the interest is compounded each year
- t is the number of years
Let’s break it down with an example:
Let us say that you wish to invest ₹1,000 every month. The RD interest rate is 6% per annum for 3 years.
Here’s how it works:
- Total Investment: Over 3 years, you’ll be putting in ₹1,000 each month. So, in 36 months, your total investment will be:
1,000×36= ₹36,000 - Estimated Returns: Based on the interest rate of 6% per annum, you’ll earn an estimated RD interest of ₹3,514 over the 3-year period.
- Total RD Value: Adding the interest to your total investment gives you:
36,000+3,514= ₹39,514
So, at the end of 3 years, your total RD value will be approximately ₹39,514.
Benefits of RD Calculator
According to new RBI rules, RDs are subject to TDS. However, RD return calculators don’t include it.
Despite this small detail, the RD return calculator offers some great benefits:
- Time-saving: You can quickly figure out your recurring deposit scheme earnings in advance!
- Comparison: The recurring deposit calculator lets you compare different RD schemes to find the best one.
- Convenience: Easy to use and available online, anytime.
- Accuracy: The calculator provides precise estimates, which are essential for smart financial planning.
Types of RD in India
In India, there are several types of Recurring Deposit (RD) accounts.
Here are the main types:
1. Regular Recurring Deposit Account
This is the most common type of RD. You deposit a fixed amount every month for a specified tenure, earning interest on the principal amount. The interest is compounded quarterly and paid at maturity.
2. RD Account for Minors
These accounts can be opened in the name of minors under the supervision of parents or guardians. They help parents save for their children’s future needs.
3. Senior Citizens Recurring Deposit Account
Designed for senior citizens, these accounts offer a higher interest rate compared to regular RDs. The additional interest rate is usually around 0.50% to 0.75% more than the standard rates.
4. Tax Saving Recurring Deposit Account
These RDs allow investors to claim tax deductions under Section 80C of the Income Tax Act, of 1961.
5. NRE/NRO Recurring Deposit Account
Non-Resident Indians (NRIs) can invest in RDs through Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts. These accounts help NRIs manage their savings and earn interest in India.
6. Flexi Recurring Deposit Account
These accounts offer flexibility in the monthly deposit amount. This means that you can deposit different amounts every month. However, the amount should be within the minimum and maximum limits your bank sets.
7. Post Office Recurring Deposit Account
Offered by India Post, these RDs are available at post offices across the country. They offer competitive interest rates and are backed by the government.
You may also want to know the What is FD Calculator
RD vs FD
RDs and FDs serve different needs. RDs are great for regular savings with a fixed deposit, while FDs usually offer higher interest rates for lump-sum investments. Your choice depends on your saving habits and financial goals.
Here are a few points of difference between Recurring Deposits (RD) and Fixed Deposits (FD):
| Feature | FD (Fixed Deposit) | RD (Recurring Deposit) |
| Investment Method | Invest a lump sum amount. | Make regular monthly deposits. |
| Interest Rates | Generally, it offers slightly higher interest rates. | Usually, it has slightly lower interest rates. |
| Tenure | Can range from 7 days to 10 years. | 6 months to 10 years. |
| Interest Payout | Interest can be received periodically (monthly, quarterly, annually) or at maturity. | Interest is compounded quarterly and paid at maturity. |
Investing in Recurring Deposit Schemes: Is It Advantageous?
Investing in a Recurring Deposit (RD) is a great way to build long-term savings with regular, manageable deposits. Suppose you are a teenager or a person looking for a disciplined saving approach. RDs are for you!
However, if you’re looking for more growth potential and want to explore new opportunities, the stock market offers exciting options that can diversify your investments and potentially yield higher returns. Balancing RDs with other investments can be a smart strategy for a well-rounded financial plan.
Other Investment Options
There are multiple segments in the stock market that you can explore:
- Stocks
- Mutual Funds
- ETFs
- Currencies, etc.
You can now invest in the stock market at zero brokerage!
FAQs| RD Calculator
If you invest ₹5,000 monthly in an RD for 5 years, the maturity amount will depend on the current RD interest rate offered by the bank. You can use an RD calculator to calculate the exact amount.
The best RD for 5 years is one that offers competitive interest rates and flexible terms. You can compare a few options using an online recurring interest calculator!
To calculate your RD maturity amount, you need to input your monthly deposit, interest rate, and tenure into an RD calculator.
RDs and FDs serve different needs. RDs are great for regular savings with a fixed deposit, while FDs usually offer higher interest rates for lump-sum investments.
No, RDs require you to keep your money deposited for the full term. Premature withdrawals are usually allowed but may incur penalties and reduce your returns.
RDs offer flexibility with regular deposits, while PPF (Public Provident Fund) provides tax benefits and a higher interest rate but with a longer lock-in period.
RDs are good for disciplined, regular saving, while SIPs (Systematic Investment Plans) in mutual funds offer the potential for higher returns through market investments.
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.