RD example
₹2,000 a month in an RD for 5 years
At 7% a year, compounded quarterly, ₹2,000 a month in a recurring deposit for 5 years grows to ₹1,43,866. You deposit ₹1,20,000 and earn ₹23,866 in interest before tax.
Result
₹1,43,866
Maturity value after 5 years
- Total deposited
- ₹1,20,000
- Interest earned
- ₹23,866
- In today's money (6% inflation)
- ₹1,07,505
- Same amount in a SIP at 12%
- ₹1,64,973
Each instalment earns interest only from the month it goes in, so the interest is far smaller than on an FD of the same total.
RD interest is taxed at your slab rate and banks deduct TDS on it, so the return you keep is lower.
₹2,000 a month for 5 years at different RD rates
| Interest rate | Interest earned | Maturity value |
|---|---|---|
| 6% | ₹20,127 | ₹1,40,127 |
| 6.5% | ₹21,982 | ₹1,41,982 |
| 7% | ₹23,866 | ₹1,43,866 |
| 7.5% | ₹25,779 | ₹1,45,779 |
| 8% | ₹27,724 | ₹1,47,724 |
Rates here are illustrative. RD rates differ by bank and usually match the FD rate for the same tenure.
₹2,000 a month at 7% for different tenures
| Tenure | Deposited | Interest | Maturity value |
|---|---|---|---|
| 1 year | ₹24,000 | ₹924 | ₹24,924 |
| 2 years | ₹48,000 | ₹3,640 | ₹51,640 |
| 3 years | ₹72,000 | ₹8,275 | ₹80,275 |
| 5 years | ₹1,20,000 | ₹23,866 | ₹1,43,866 |
| 10 years | ₹2,40,000 | ₹1,07,403 | ₹3,47,403 |
How this is worked out
A recurring deposit takes ₹2,000 every month for 60 months. Each instalment earns interest compounded quarterly from the month it is paid until maturity, so the first one compounds for 5 years and the last for a single month.
Adding up all 60 instalments with their interest gives the maturity value of ₹1,43,866. On average your money is invested for only about half the tenure, which is why 5 years at 7% adds ₹23,866 rather than the 7% a year an FD would earn on a lump sum.
An RD suits a short, fixed goal where the amount matters more than growth. For goals five years or more away, the same ₹2,000 in an equity SIP at an assumed 12% would grow to about ₹1,64,973, with the trade-off that the return is not fixed.
Frequently asked questions
Results are estimates for education and planning, not financial advice.
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