A Recurring Deposit is a savings product offered by banks that allows you to deposit a fixed amount every month for a predetermined period. It combines the discipline of regular saving with the guaranteed returns of a fixed deposit.
Banks calculate RD interest using quarterly compounding. Each monthly installment earns compound interest for its remaining tenure. The formula for each deposit is: A = P × (1 + r/n)^(n×t), applied to each monthly installment separately.
Interest earned on RD is taxable. TDS is deducted at 10% if total interest across all FDs/RDs exceeds ₹40,000 per year (₹50,000 for senior citizens). Unlike tax-saving FDs, RDs do not qualify for Section 80C deductions.