How to Calculate Recurring Deposit Interest Rate?

21 Mar 2023

Back to all Articles
How is interest on recurring deposit calculated

A recurring deposit is one of the best ways a small investor can invest funds and grow them. In a recurring deposit, a fixed amount of money is invested at a fixed duration for a fixed period of time. These installments all mature on the same date. Essentially, a recurring deposit is like having multiple fixed deposit investments, all of which mature on the same day.

You do not have to wait till a recurring deposit matures to find out the interest that you will earn on a recurring deposit. If you’re wondering how to calculate RD interest, then read this guide.

How to calculate recurring deposit interest using a calculator:

With the digital revolution in banking, the services offered by banks have undergone a sea change. It is no longer necessary to invest in a recurring deposit to find out how much you will earn on maturity. There are several banks that have a recurring deposit interest calculator on their website. This tool addresses how to calculate interest on RD account.

To calculate the RD account interest, you need to input the following:

  • Installment amount
  • Rate of interest
  • Period of investment

After putting in these details, you need to click submit and the calculator will show you the maturity amount. Using this calculator can help you find out the total interest you can earn on a recurring deposit instantly. It is very essential to use this calculator to find out the maturity amount and the interest as it can help you find out how much to invest if you’re raising funds for a particular goal. One important thing to remember is that banks compound interest quarterly on these deposits.

If you’re investing for a senior citizen, the rate of interest on such deposits is higher.

How to calculate RD interest manually?

If you’re wondering how to calculate compound interest for recurring deposit, you can use this formula:

M = P*(1+R/N)^Nt

M = Maturity amount.
P = Principal amount or the installment amount
R = Interest rate in decimal, convert interest rate into decimal by dividing it by 100
T = Time duration in months
t = Time duration in years
N= compounding frequency (since it is quarterly, it will be 4)

This is the formula for calculating compound interest. Banks generally compound interest quarterly on deposits. However, to calculate compound interest on recurring deposit, the balance at the beginning of the quarter is considered. So, if you open a recurring deposit between a quarter, simple interest is calculated for the months till a new quarter begins and from the new quarter, compound interest is calculated. This is why there may be a slight difference between manual calculation and the amount that a holder may receive on maturity.

Important Points to Remember about Recurring Deposit Interest

  • Interest on recurring deposit is taxable. This interest will be added to your taxable income, and you will have to pay tax on it based on the slab you are in.
  • Your bank will deduct tax if the total interest on recurring deposit exceeds Rs. 10,000 in a year. You can submit Form 15G/15H declaring that your income won’t be in the taxable slab. On submission of this form, the bank won’t deduct tax on your recurring deposit income.
  • Senior citizens get a deduction on interest earned through recurring deposits under Section 80TTB up to Rs. 50,000. Section 80TTB gives a deduction on interest income from savings account interest, fixed deposit interest, recurring deposit interest etc.

Popular Articles

Related Articles

  • Disclaimer

    The contents of this article/infographic/picture/video are meant solely for information purposes and do not necessarily reflect the views of Bank of Baroda. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Bank of Baroda and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Bank of Baroda or its affiliates to any licensing or registration requirements. Bank of Baroda shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

Leave a Comment

Thanks for submitting your details.

RD vs FD - Difference Between Recurring Deposit and Fixed Deposit

Today, maintaining a bank account has become a norm. You need to provide your bank account number on various occasions; like receiving the salary from employer or subsidy from the government under a scheme. And most people open either fixed deposits or recurring deposits.

How to Open a Recurring Deposit Account?

What is RD account is pretty clear but how to open recurring deposit account? For opening an RD account, the investor needs to visit the nearest bank or post office and fill out the application form. Certain basic documents shall be provided like identity documents, address proofs, bank detail etc.

Add this website to home screen

Are you Bank of Baroda Customer?

This is to inform you that by clicking on continue, you will be leaving our website and entering the website/Microsite operated by Insurance tie up partner. This link is provided on our Bank’s website for customer convenience and Bank of Baroda does not own or control of this website, and is not responsible for its contents. The Website/Microsite is fully owned & Maintained by Insurance tie up partner.

The use of any of the Insurance’s tie up partners website is subject to the terms of use and other terms and guidelines, if any, contained within tie up partners website.

Proceed to the website

Thank you for visiting

We use cookies (and similar tools) to enhance your experience on our website. To learn more on our cookie policy, Privacy Policy and Terms & Conditions please click here. By continuing to browse this website, you consent to our use of cookies and agree to the Privacy Policy and Terms & Conditions.